M&A can go from being on track to going off the rails in a few simple mistakes.
Doing deals is complicated: Pre-deal, you need to carefully manage the expectations of the vending company’s leadership as well as your own board. Your M&A team will be co-ordinating the work and interactions between 3rd party specialists covering tax, legal, and others. ‘Massive parallel processing’ is required for due diligence, valuation, integration planning, financing and negotiations, none of which run to a predictable timescale. Just as small problems in one area can quickly spread and distract, leading to delays and mistakes; getting that unexpected opportunity tested and baked into the deal seems equally difficult. Keeping all the moving pieces, information and people aligned and getting them to the finish line requires skill, hard work and not a small bit of luck.
And unfortunately, that was the easy part! The complexity only increases post-close, as activities to gain control of and stabilise the business take place, sometimes alongside value creation, communications and engagement activities. Oh, and let’s not forget business as usual, which has to proceed as smoothly as possible. New people, new processes, new initiatives – it’s no wonder that integration is referred to as ‘changing the engines at 30,000 feet’.
Roughly 70% of all M&A fails to add value, and in about a third of cases it actually destroys it. For all the well-established reasons, one rarely highlighted is in fact the most significant: There’s simply too much going on to keep your arms around and deliver safely. As any skier will tell you, there’s a hair’s breadth of difference between being in full control and suddenly finding that you have lost your ability to turn or stop. And it’s not just about how quickly you’re moving. M&A and integration takes place in an environment of uncertainty and unexpected change, crowded with other initiatives and priorities. You’re skiing in unfamiliar terrain full of hidden obstacles and poor visibility ahead. And you’re being pelted with snowballs. And 10 other people are holding onto your skis, trying to pull you in different directions. Getting to the bottom in one piece at all is a minor miracle in itself.
Good planning and strong project management discipline is typically cited as the best way to ensure you stay in control of your M&A journey, and this isn’t wrong. But neither is it the whole story. In fact, over-rigid adherence to a detailed integration project plan or process can become the very thing that gets you into trouble. When the landscape of leadership priorities, post-close discoveries, and business performance has changed, ‘just sticking to the plan’ usually results in disaster. Agile programme management that anticipates and adjusts to changing circumstances is a must in successful deals, pre-close and post.
But even with this in place, acquisitions and integrations often spiral out of control. The tragic irony is that a poorly-controlled pre-close process usually becomes a runaway train that accelerates to completion, even if it’s not the right deal or at the right price. Post-close, a poorly-controlled integration does the opposite, and stalls mid-flight (also not a good thing in most situations).
So how can you tell if they are in danger of losing control of their acquisition or integration, even if all you see today is clear skies and calm winds? Here are some warning signs:
Good acquirers know how to keep their deal-making and integration under control by applying tools, approaches, strong leadership and experienced people. Great acquirers also understand the need to balance all three at just the right level so that they avoid making bad acquisitions, and create value post-close even when the weather changes mid-flight. If you’d like to know more about how to make sure you can stay in control of your M&A and integration, or regain that control if you feel it slipping away, give us a call.
Inside you’ll find out more about the BTD approach, learn some inconvenient truths and discover how to get much more from your deals.