Do a deal – quick!

I read an article this week in Acquisitions Daily that 62% of deal makers surveyed said that a key pressure to do deals was to match their acquisitive competitors.  I hope we are not returning to the bad old days but I can imagine a warped logic that says “our competitors are doing deals, we need to do something – anything – just do a deal”!  Under pressure not to appear weak, slow off the mark, ‘behind the curve’, not ‘getting it’ or any other cliché one cares to name I can see poor acquisitions in the making and the ranks of under-performing or failed acquisitions swelling.

Just because everyone else is doing it is not a sound strategic rationale for making a decision – no matter what external advisors say.  By the way – they would say that wouldn’t they?  Against such advice, where are the Boards of Directors to counter the siren’s call with objective and constructive testing of the CEO - who may be buckling under such pressure?  Come to think of it, are other members of the executive team willing to stand up and speak out with confidence rather than get tainted as being obstructive?  Our own recent research our own recent research suggests that only 44% of Board Chairmen and NEDs regularly restrain undue management enthusiasm for a deal – not an ideal situation as the M&A wave begins to gather irresistible pace.

Having the right tools and experience is not enough – it is the conditions under which M&A deals are struck are just as important.  Here are some things you can do now to ensure bring about these conditions:

1. Ensure genuine openness and challenge from individuals on the Board, executives and other participants throughout the pre-close process including process governance and an underlying culture in place that encourages self-questioning, raising of concerns and constructive disagreement without risk of personal reputation; a lack of over-dominating individuals within the decision-making process.
2. Work as a team of connected experts, both internal and external, willing and able to comment on the big picture as well as your own sphere of expertise.
3. Maintain a clear understanding of the objectivity and motivations of those inside and outside the business to ‘just get the deal done’, and restrain undue influence.
4. Ensure Board and executive attention, focus and hard measurement includes long-term deal performance – not just doing the deal.

If deals are made for the wrong reasons, then good people and processes can only try to recover a bad decision – but it remains a bad decision.