Getting Back on the Horse: A checklist for restarting your M&A

Getting Back on the Horse: A checklist for restarting your M&A

This week, the UK Financial Times issued an article summing up the current state of M&A: “Global dealmaking drops to lowest level in more than a decade”. In this paper, they took the time (including lots of supporting data and examples) to provide the following insights:

  • M&A has dropped off a cliff during the past few months as a result of the Covid crisis and the need for firms to retrench and survive;
  • Private Equity firms have been the most active during the period due to their relatively large reserves of cash;
  • The rate of M&A recovery going forward is uncertain, but lawyers and other advisers with a commercial interest in M&A are very positive about the future;
  • Er, um, that’s it.

I only offer a partial apology for the sarcasm in my summary, but I expect more from the FT or any journalist: Just like those of you reading this, if I’m going to spend my limited time reading something, I better get something out of it I don’t already know.

So, in the hope that we can meet our own lofty expectations for a post, here’s a view from BTD on the ‘so what’: For those firms looking to resume or rebuild their M&A strategy, we suggest you ask yourself the following:

  1. How has the world changed for your own business? Your specific need for ‘capability-enhancing’ M&A – and therefore the ideal profile of your targets – may have changed.
  2. Is acquisition still the best way to achieve your goals? Given the new market conditions, alliances and partnerships might be a better option in some cases to manage risk. Scenario planning will be especially important going forward.
  3. Is your acquisition purpose truly clear and agreed? A problem even in good times, the need for genuine leadership support of clear acquisition goals is going to be critical when everyone will have a different view on what the future holds. (If this specific point is of particular interest, you may want to attend our next webinar on this topic being held on Wednesday 8th)
  4. Are targets you previously rejected, or who rejected your interest, worth another look? Differences in valuations and motivations to sell, and in your own assessment criteria, may mean you need to refresh your pipeline of potential targets.
  5. Will this deal impact your organisation’s resilience and agility? As discussed in previous posts, the world has changed, at least in some aspects: M&A can no longer just be considered in terms of new capabilities and financial return.
  6. How robust are your synergy and value creation assumptions? Future uncertainties in both the magnitude and timing of realisation will need to be more rigorously modelled across multiple ‘possible case’ scenarios.
  7. Is your due diligence focused on spotting new stresses or weaknesses within the target? Many businesses will soon be presenting a renewed interest in selling; make sure your integration analysis helps you separate the recoverable from the zombies.
  8. How easy will it be during integration to retain customer satisfaction, maintain business performance and minimise commercial risk alongside delivering your value creation goals? Not a new requirement, but one that, more than ever, can’t be taken for granted. Just as in the Great Recession, acquirers will no longer be able to hide a poorly-performing acquisition behind a curtain of stable market growth.
  9. Is your own ability to design, plan and manage the post-close integration and improvement ready for the challenge? Post-close, acquirers will need to be faster at delivering benefits, less disruptive to BAU and more flexible to accommodate market uncertainties; your ‘standard checklist’ approach to integration – and the skills of those who run it – are likely to need refreshing.
  10. Is your business – and its leadership – still ready for acquisition and the integration to follow? Integration represents a significant shock to the organisational system, and even in the ‘best’ of times puts unique pressure on your leadership.

As a specialist firm with a senior team and over 20 years of experience, BTD is providing the new thinking, advice, resources and tools to help M&A, integration, alliance and divestment teams navigate the new world; including helping clients through all of the above considerations. If you think we can help you achieve your goals, give us a call.