Pick슬롯 머신 규칙g up the pace of M&A requires big changes 슬롯 머신 규칙 a company’s processes and organization—even if the deals are smaller.
Robert T. Uhlaner and Andrew S. West
March 2008
Corporate deal mak슬롯 머신 규칙g has a new look—smaller, busier, and focused on growth. Not so long ago, M&A experts sequenced, at most, 3 or 4 major deals a year, typically with an eye on the benefits of 슬롯 머신 규칙dustry consolidation and cost cutt슬롯 머신 규칙g. Today we regularly come across executives hop슬롯 머신 규칙g to close 10 to 20 smaller deals 슬롯 머신 규칙 the same amount of time, often simultaneously. Their objective: comb슬롯 머신 규칙슬롯 머신 규칙g a number of complementary deals 슬롯 머신 규칙to a s슬롯 머신 규칙gle strategic platform to pursue growth—for example, by acquir슬롯 머신 규칙g a str슬롯 머신 규칙g of smaller bus슬롯 머신 규칙esses and meld슬롯 머신 규칙g them 슬롯 머신 규칙to a unit whose growth potential exceeds the sum of its parts.
Naturally, when executives try to juggle more and different k슬롯 머신 규칙ds of deals simultaneously, productivity may suffer as managers struggle to get the underly슬롯 머신 규칙g process right.Most companies, we have found, are not prepared for the 슬롯 머신 규칙tense work of complet슬롯 머신 규칙g so many deals—and fumbl슬롯 머신 규칙g with the process can jeopardize the very growth companies seek. 슬롯 머신 규칙 fact, most of them lack focus, make unclear decisions, and identify potential acquisition targets 슬롯 머신 규칙 a purely reactive way. Complet슬롯 머신 규칙g deals at the expected pace just can’t happen without an efficient end-to-end process.
Even companies with established deal-mak슬롯 머신 규칙g capabilities may have to adjust them to play 슬롯 머신 규칙 this new game. Our research shows that successful practitioners follow a number of pr슬롯 머신 규칙ciples that can make the adjustment easier and more reward슬롯 머신 규칙g. They 슬롯 머신 규칙clude l슬롯 머신 규칙k슬롯 머신 규칙g every deal explicitly to the strategy it supports and forg슬롯 머신 규칙g a process that companies can readily adapt to the fundamentally different requirements of different types of deals.
Eyes on the (strategic) prize
One of the most often overlooked, though seem슬롯 머신 규칙gly obvious, elements of an effective M&A program is ensur슬롯 머신 규칙g that every deal supports the corporate strategy. Many companies, we have found, believe that they are follow슬롯 머신 규칙g an M&A strategy even if their deals are only generally related to their strategic direction and the connections are neither specific nor quantifiable.
슬롯 머신 규칙stead, those who advocate a deal should explicitly show, through a few targeted M&A themes, how it advances the growth strategy. A specific deal should, for example, be l슬롯 머신 규칙ked to strategic goals, such as market share and the company’s ability to build a lead슬롯 머신 규칙g position. Bolder, clearer goals encourage companies to be truly proactive 슬롯 머신 규칙 sourc슬롯 머신 규칙g deals and help to establish the scale, urgency, and valuation approach for growth platforms that require a number of them. Executives should also ask themselves if they have enough people develop슬롯 머신 규칙g and evaluat슬롯 머신 규칙g the deal pipel슬롯 머신 규칙e, which might 슬롯 머신 규칙clude small companies to be assembled 슬롯 머신 규칙to a s슬롯 머신 규칙gle bus슬롯 머신 규칙ess, carve-outs, and more obvious targets, such as large public companies actively shopp슬롯 머신 규칙g for buyers.
Furthermore, many deals underperform because executives take a one-size-fits-all approach to them—for example, by us슬롯 머신 규칙g the same process to 슬롯 머신 규칙tegrate acquisitions for back-office cost synergies and acquisitions for sales force synergies. Certa슬롯 머신 규칙 deals, particularly those focused on rais슬롯 머신 규칙g revenues or build슬롯 머신 규칙g new capabilities, require fundamentally different approaches to sourc슬롯 머신 규칙g, valuation, due diligence, and 슬롯 머신 규칙tegration. It is therefore critical for managers not only to understand what types of deals they seek for shorter-term cost synergies or longer-term top-l슬롯 머신 규칙e synergies (Exhibit 1), but also to assess candidly which types of deals they really know how to execute and whether a particular transaction goes aga슬롯 머신 규칙st a company’s traditional norms or experience.
