Keep the board on-board

8 ways to ensure the board understands your acquisition strategy 

Doing deals is stressful. Amping up that stress is the need to keep all parties involved and informed. You need them to raise concerns, detail risks and work creatively to overcome obstacles. Colleagues who say little and do what you tell them may seem wonderful until they aren’t.

Generally, your managers, and those of the target or newly-acquired company, get all the attention. Next to customers, the most often overlooked or misused group is your board. It isn’t that they’re not part of the process, rather it is the nature of most boards. Whether a traditional corporate board, or that or a PE-owned company, board motivations and dynamics are more diverse, more opaque, and harder to manage than those of your executive team. Treating them just like another senior stakeholder group will not work.

“So what? In our company, the board sets clear expectations, and typically follows our recommendations. Where’s the problem?” For some BTD client CEOs, this is true – and they count themselves fortunate. But it is the exception.

A board is not a sounding board, it plays a critical advisory role in tempering excessive management zeal. Boards that fail to moderate deal enthusiasm aren’t fulfilling their role. According to BTD research, boards fall short in over half of all deals. Their firms end up doing more, and worse deals.

On the flip side, a ‘compliant’ board can blindside you at the 11^th hour questioning or rejecting a deal you’ve been discussing with them for months. Time and money wasted, all the distraction; why couldn’t they have raised their concerns earlier?

Post-close, the challenge changes: Transformational change upends your business. Risks to operations, reputation, and talent abound. When things get ‘heavy’ you really need your board. Are they close enough to the post-close action? Are they ready to help when you need them?

A passive board is a missed opportunity – for advice, connections, perspective and challenge. You must keep them engaged throughout the process, from strategy through value delivery. Common barriers to board engagement are:

PRE-CLOSE BARRIERS: They should help you confirm deal potential, but:

1. Oh strategy, wherefore art thou? They need to understand the central questions: How does this deal support our strategy? If the strategy is either unclear or poorly understood, everything that follows will be built on sand.
2. Goalpost? What goalpost? Every board member has a perspective. Each may represent different shareholder groups and bring different experiences. Forget ‘the board’: how well do you understand and work with each member?
3. Board culture vs. company culture. It’s a safe bet that your executive team have a unified attitude towards risk, pace, and long short-term perspective. Boards, rightly, often see things differently. How do they balance costs, benefits and risks? Is it the same as your team? If not, reaching an agreement on M&A decisions may be difficult. If you don’t know where they stand, find out.
4. New players, new rules. If your strategy or board membership changes during a deal, you may have to cycle back to the beginning.
5. You never ask! Does your board actually have any power? A strong CEO can neutralise a board. If your board has become a rubber stamp for deal approval, it will fail you when you need perspective. And you have no one to blame but yourself.

POST-CLOSE BARRIERS: They should help you deliver deal value, but:

6. Avoiding the weeds. You must keep the board’s attention post-close. You and your team must master the details. As CEO, you must find ways to pull the board in where its expertise will help. They’ll have limited time and will not master the details. You need to help them to contribute.
7. The deal is done; now it’s your job! Even if your board members are able to bring operational and integration experience, they are often not seen as areas where boards should They are a resource. You lose their value if you let them disengage.
8. Once bitten, twice shy. How well did your last acquisition go? Does your board agree? If they view your last acquisition as underperforming, over budget, disruptive, or poorly managed, expect board resistance when you come back for another turn.

Boards can dramatically improve M&A performance. Sadly, they are mostly underused. The best acquirers have active boards that enhance their M&A and integration capability. They help reject bad deals early, and accelerate value capture for good ones. If you’d like to know more about how to help your board support and strengthen your M&A capabilities, give BTD Consulting a call.