The 10 habits of highly effective acquirers: 1 – Resisting Deal Fever

The 10 habits of highly effective acquirers: 1 – Resisting Deal Fever

In January 2014 BTD released the results of research into leadership behaviours that influence long-term M&A performance. In the first of this series of comments, we consider the most well-recognised: Deal Fever:

“The deal takes on its own dynamic. Negatives are overlooked, and so are any answers they don’t want.”

So said the Director of M&A and Alliances of a global airline in early 2013, nicely summing up the confluence of personal pressures, business incentives, and sheer fun and satisfaction some feel when completing an acquisition. But do people truly understand the prevalence of this behaviours? According to our research, 85% of C-level executives believe M&A is influenced more by personal pressures than by objective business goals; when it does occur, over 90% feel that deal fever has a significant, if not critical, impact on M&A performance. Such behaviours are common in business cultures that are comfortable with relatively high degrees of risk; ones in which personal career motivations and imbalanced dynamics within the leadership team are allowed to override most formal processes nominally in place to ensure thoroughness and slow the pace. But this is not just about overexcited individuals – 36% of firms we surveyed believe that their M&A function view getting the deal done as more important than what happens afterwards, most of the time.

While endemic, it can be overcome. Central to the solution is ensuring that those doing deals are strongly accountable – and incentivised – for long-term success, not just deal completion. Giving post-close leaders direct say in deal assessment is also key. Good governance also plays a role: Formal stage-gate reviews during the pre-close process, and techniques such as Red Team Reviews can also ensure clear, objective thinking informs the ultimate deal decision.

Our survey responses suggest that avoiding deal fever using steps like these can increase the likelihood of consistently achieving deal benefit by over 15%, equating to millions of added enterprise value on most acquisitions.

Does your M&A process consistently eliminate the personal agenda?
Do incentives – formal and informal – encourage deal doing or deal success?

In my next comment, I’ll discuss our second  habit of effective acquirers, keeping politics and ego out of the M&A debate.