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How to Run a Top M&A Shop

by on August 27, 2013

FunnelBigger technology companies today are doing 10-20 smaller deals a year with the intent of combining a number of complementary deals into a single strategic platform to pursue growth.  That’s a lot to deal with.

If you compare that to running sonar in a submarine, at that speed you could run over an underwater rock concert and never know it!

Most companies are not prepared for the intense work of completing so many deals.  Productivity can suffer.

The biggest practical challenge most companies face is getting not only the right people but also the right number of people involved in M&A.  To manage that deal flow companies have to invest to build their skills and capabilities.

Here are my key points to running a Top M&A shop:

1.  Support from Senior Management – The most common challenge executives face in a deal is remaining involved with it and accountable for its success from inception through integration.  They tend to focus on sourcing deals and ensuring that the terms are acceptable, quickly moving on to other things once the LOI is signed and leaving the integration work to anyone who happens to have the time.

To improve the success rate executives must give more thought to putting the right people in key integration positions.  I wrote about this point in a previous post in an interview with Frank Berzau of Berzau Consulting and Training (http://berzau-consulting.com/) about Cross border M&A.  In that post Frank states that this is the most important point in making an acquisition successful.

2. The Deal Owner – Deal owners are accountable for specific acquisitions, beginning with the identification of a target and running it through its eventual integration.  The best M&A Shops appoint that deal owner very early in the process.  This assignment could go to a person from the corporate development department or even a line organization, depending on the type of deal.

3. The Integration Manager – Often the most under appreciated and poorly resourced role, which is essentially the Deal Owner’s Chief of Staff.  Typically, integration managers are not sufficiently involved early enough in the deal process.   Many of them are chosen for their skills as process managers, not as general managers who can make decisions, work with people throughout the organization, and manage complicated situations independently.

4. Sizing a Team – Companies that do deals only occasionally can probably manage by tapping functional and business experts to conduct due diligence and then build integration teams around specific deals.  This is how I managed all of the deals at the technology companies I worked with.  Bigger companies create a permanent team.  To do 10 deals a year, a company will identify  150-200 possible targets, conduct due diligence on around 40-60, and ultimately integrate the final 10.  A typical team may look like this:

  • 5 deal owners and integration managers
  • 4 members in HR
  • 5.5 members in finance

Conclusion

There is no single approach that every company can use to guarantee success of their transactions, but the companies that do it best pay attention to these 4 key points.

p.s.

If you’re wondering how you build a company that you can sell for a premium in a few years, contact me to discuss the Valuation Amplification Process.

I also invite you to download the white paper and learn the 5 step process on How to Quickly Increase Your Valuation: a Proven 5 Step Process.  http://www.therevenuegroup.net/free-offer.html

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From → M&A, Strategy

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  1. Fight Deal Hangover for Successful M&A | Mike Rogers

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