Mergers and acquisitions (M&A) can be a game-changer for businesses seeking to scale to new heights. It's a strategic move that can propel you into new markets, bolster your product portfolio, or provide a competitive advantage.
Twenty years ago, 70%-90% of M&As would fail. However, with acquirers utilizing more experienced experts and a more sophisticated due diligence process, now nearly 70% of M&As succeed. It's clear that using experienced deal professionals creates value. In 2024, there's no excuse for businesses to approach M&A without a concrete strategy.
Growth is the engine that drives a mid-market company's success and longevity, and not many names stand out in the field of propelling corporate growth as much as Alok Gupta — the founding managing partner behind Loki Group, Inc.
Built with a relentless passion for nurturing organizational greatness and reinforced by an impressive track record that spans more than $125 billion in transaction value across 15 countries, Gupta uses his fractional Chief Corporate Strategy Officer services to hoist the realm of consulting over outdated modalities.
Success hinges on meticulous planning, a skilled team, and a well-defined strategy tailored to each company. This article equips business owners with a five-step roadmap — the same one Gupta and his team use — to navigate the M&A process effectively. Let's dive in.
Step 1: Assess and strategize
Before embarking on the M&A journey, it's essential to hit the pause button and establish a clear vision. Ask yourself:
● Where are we headed? What does our ideal company look like in a decade?
● What are our core values? How should potential targets complement and amplify our brand identity?
● What do we hope to achieve? Are we aiming to expand our market share, acquire new technologies, or enter untapped geographical territories?
Having a well-defined vision statement, setting clear goals, and crafting a scoring system are crucial. These empower you to meticulously and systematically assess potential targets and ensure they align seamlessly with your long-term goals.
Step 2: Plan
With the goalpost in place, it's time to assemble a dream team to shepherd the M&A process. This team should be a strategic powerhouse, with each member possessing specific expertise and ownership to drive decisions within their space.
● Steering committee: The ultimate authority figures who hold the final say on approving deals.
● Decision maker/project sponsor: This executive leader is the guiding light, ensuring the goalposts are visible to the function/workstream leaders and guardrails are in place. They provide direction and make decisions that may affect multiple functions and workstreams.
● Function/workstream leaders: These individuals spearhead specific areas such as finance and accounting, supply chain/operations, integration planning, and legal negotiations. It is best to empower and coach these leaders to make decisions and work with their peers to ensure alignment.
Remember, a well-rounded team with the necessary experience is paramount for success.
Step 3: Prepare
This is where the groundwork gets laid. Function/workstream leaders meticulously craft detailed plans and curate due diligence questions tailored to each potential target. This involves a comprehensive assessment of the target company's financial health, operational efficiency, and possible integration challenges. Financial records are scrutinized, operations are evaluated, and potential roadblocks are identified and addressed proactively.
When responses to due diligence questions are received, it is paramount for function/workstream leaders to go beyond surface-level answers and determine the "so what" and impact of the response. Are there any red flags that need to be further investigated? Are there ways to mitigate or manage any issues? What synergy opportunities or additional costs must be worked into the integration plans? What needs to be shared with the project sponsor and steering committee so they can consider the target valuation, deal structure, and whether the deal is achievable?
If the deal is to proceed, detailed execution plans for closing the deal and integration plans to begin post-close are critical to minimize potential issues for customer experience and start creating value from the newly joined organizations.
Step 4: Execute
Once due diligence is complete and all parties are aligned to complete the deal, the execution phase commences. This phase encompasses:
● Finalizing legal agreements: Watertight contracts are drafted and signed by all parties involved.
● Establishing reporting structures: A clear structure for the merged entity is outlined, ensuring transparency and streamlined communication.
● Implementing the integration plan: The meticulously crafted integration plan ensures a smooth transition for both companies. It should include a cadence of meetings to ensure consistent alignment and understanding of action items, interdependencies, mitigation plans, and areas of coordination across separate functions and workstreams.
Step 5: Measuring Success
M&A is an ongoing endeavor. After the deal is closed, continuously monitoring progress against your established goals is crucial. You need to ask yourself: Are you achieving the projected cost savings or market share growth you envisioned? Continuously track performance metrics covering all bases, such as employee retention, operating costs, and revenue growth. Then, you can adjust as needed to ensure the M&A strategy stays on track and delivers long-term value.
Building a Sustainable Future
By utilizing these steps and building a solid team, business owners can be better prepared to approach M&A with confidence and leverage it as a springboard for exponential growth. Think of your M&A strategy as a well-constructed building. A clear assessment (the roof) provides direction and focus. Planning, preparation, and execution (the pillars) support the structure and ensure stability. Finally, continuous tracking and improvement (the foundation) guarantee long-term success.
Remember, successful M&A is a marathon, not a sprint. With careful planning, a skilled team, and a commitment to continuous improvement, you can transform M&A into a powerful tool to propel your business toward a prosperous future.
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