Navigating the New World of M&A and Integration Part IV: Reaching your Destination – Time for a New Boat?

Navigating the New World of M&A and Integration Part IV: Reaching your Destination – Time for a New Boat?

In this post, the final in the series, BTD UK Partner Carlos Keener considers the learnings and lessons from the previous three posts and considers how this might impact the role and nature of M&A, Divestment and Alliance teams themselves. You can read the first post in the series discussing immediate challenges facing deal makers and integrators here.

 

Columbus and Drake would have argued. Early European explorers in the 15th and 16th centuries needed ships, technologies and people who were willing and able to navigate well beyond sight of recognised shorelines, survive long durations at sea, and travel deep inland in search of new resources and territories to claim. As the age of exploration evolved into one of trade and colonisation, the technology and mindset had to change to reflect new objectives. Smaller, faster caravels such as the Niña and Pinta gave way to larger, slower but often armed vessels better suited to transporting and defending (or for some, capturing!) cargo and passengers. Explorers gave way to entrepreneurs, missionaries, colonists and the military.

As a cautious post-lockdown recovery begins, business leaders will need to reconsider how they organise and govern their M&A, divestment and alliance capability. With speed, agility and resilience as watchwords for the future, let’s illustrate what this might look like by stepping into the future of Quintado, our fictional publicly-listed software business, now back on its feet and resuming a strategy of rapid inorganic growth:

It’s December 2021, and Paul, Quintado’s CEO, reflects on an eventful year. The near-death experience Quintado faced in the spring of 2020, and the second Covid-19 wave of June-September, are now clearly behind them, and Paul is pleased to say the business weathered the crisis well, or at least better than its competitors. While not yet up to the level of commercial activity seen in the ‘far distant past’ of early 2019, the shops and offices are at least open, people are back at work (many still from home), and Q4’s business revenue has finally seen growth in all of Quintado’s major markets. With renewed confidence, inorganic growth is back on the menu.

Looking back over the past 18 months, Paul now realises how helpful it was to create their new Alliance Management team last summer, working alongside a simplified, single Inorganic Execution team, both of which report directly to him; much better than the hodgepodge of multiple M&A, divestment, and integration teams that had previously existed. The simultaneous influx in late 2019 of distressed acquisitions inbound and necessary business divestments really stretched everyone – and not in a good way, but the drive to simplify, simplify, simplify made all the difference. Today, the new unified InEx team sees people, tools and approaches being shared between different deal types. Getting teams to manage the pre- and post-close activities for each deal as a single, seamless initiative also made a big difference to accountability and results: If someone is tasked with doing a deal, they remained responsible for ensuring integration (or separation) is done properly as well.

What’s been especially interesting is to see how – despite different mindsets – the Alliance and the InEx teams also work together to pass opportunities and good practices back and forth between them; today’s acquisition target may become tomorrow’s joint venture or licencing if (as is happening more and more) the situation changes or deal agreements become harder to reach. What both groups appear to share is an ability to make decisions and get things done quickly, even though the options are more complicated than ever before. ‘Fast and frugal’ seems to be the group’s new motto, although in Paul’s mind it sometimes feels a little more like ‘damn the torpedoes, the fundamentals are right so we’ll sort out the details later!’; nevertheless, he can’t but admit it works. And let’s face it: what really made it work most of the time was Linda: the new hire whose primary job as Implementation Manager was to facilitate and mediate (not negotiate!) between the two sides of the deal (alliance or acquisition), pre-close and post. Her skills and focus in making sure both groups stayed aligned and issues resolved throughout the process really made all the difference. I must make sure and have a word with HR, thought Paul: As someone slightly on the outside of Quintado’s core business, Linda’s going to need careful management and development to keep her motivated and on board for the long term. 

One area still needs more work: While new joiners in the Alliance team like Linda clearly understand the need for strong interpersonal, influencing and communication skills to help Quintado build trust with its newfound partners (always a problem in the past), most of those in the InEx team still remain too focused on process. Any problem or mistake they make seems to result in yet another 50 pages being added to ‘the bible’; their informal name for the M&A and Divestment Playbooks they cling to. Paul has half a mind to get them to recut all these documents (12 at last count!) to no more than 30 pages of key principles. As uncomfortable as it sometimes feels, it’s been noticed that Quintado’s most successful deals are led by M&A and Divestment team members who ‘shoot from the hip’ with confidence borne from experience, with little if any reference to anyone’s playbook. But how to remove the crutch without crippling the patient? Having no standards or ability to build learnings is obviously dangerous, but today’s climate demands that people think, not just follow instructions. Paul feels part of the solution coming into view, one he relied on in their last ‘big deal’ with Lidare in 2017: Reprioritise the metrics he presents to the board; after all, metrics drive behaviours. Rather than the 75-question deal assessment, we need to be able to focus on the basics: objectives, accountability, outcome and people. After all, how they got there is far less important than what they achieved, whether they’ve got the strong relationships in place for the long-haul, and who’s responsible for making sure it all happens. Time to have another look at that Board pack…

 

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. This includes helping our clients evolve their own M&A, divestment and alliance capabilities for the future. If you think we can help you achieve your goals, give us a call.