The Five Secrets to Successful Serial Acquirers
General Omar Bradley once said of war: “Amateurs talk about strategy. Professionals talk about logistics.
The same goes for mergers and acquisitions.
After decades of collective involvement in M&A with some of the biggest serial acquirers of technology between us, we can say that those who do deals well treat it as a repeatable process. We explain five of their best practices.
Start with the team
Everyone in your organization has a day job. But when an M&A project comes along, everyone is expected to push hard to get the job done. This often means working long hours, which can quickly lead to processing delays.
Successful acquirers dedicate staff to M&A, usually in business development and legal, recognizing that M&A represents the full- or part-time employment of at least one person. This person (or team) primarily serves as the project manager.
They coordinate internal teams and external advisors and are the daily face of the organization vis-à-vis the counterparty. Over time, they also become the repository of institutional knowledge for future projects.
Successful acquirers also ensure that non-dedicated team members are sufficiently trained in the transaction process. Mergers and acquisitions are inherently time-limited and you don’t want to figure it all out on the fly.
Companies like ours offer full-day bootcamps for key participants in a transaction, covering basic concepts such as due diligence, closing conditions and indemnities.
Understand the decision-making process
Mergers and acquisitions mean working within a deadline with imperfect information about a counterparty that is probably doing it for the first time. In these circumstances, apply approaches that you would use in day-to-day business decision-making – Let’s have a meeting! Let it be run by the CFO! — creates bottlenecks.
Multiple bottlenecks create delay cascades. These delays stall the entire project or lead to a mad scramble at the end, resulting in imperfect decisions being made just to close the deal.
On-the-ground decision-making is critical: senior management cannot be expected to read every due diligence report and statement and guaranteed, but most outside advisors want input from the client team on key issues.
Successful acquirers empower their on-the-ground team leading the project to make decisions. They schedule check-ins with senior management and the board for status updates and key decision-making at a predictable cadence.
Senior management should give the negotiating team the flexibility to push through the deal without always having to ask for permission.
Lead with your philosophies
Many of the same issues come up repeatedly in mergers and acquisitions, such as whether to offer stock, assume options, reinvest transaction proceeds, or accept representative and warranty insurance.
Prior to the transaction, have a “this is how we do things” conversation with all key stakeholders. This simplifies decision-making so you can effectively communicate your value points to targets.
This exercise can involve drafting a set of template documents, with your team making decisions as if they were engaged in a live transaction, but with the luxury of time to make those good decisions. Once done, you’ll be much more efficient at runtime.
That said, forms are just one way to crystallize decision-making, so don’t get too attached to them. Transactions may be entered into on different acquiring structures or in different countries.
Map the entire offer, including integration
Successful acquirers have a timeline that outlines the entire process, not just “signing the letter of intent” by “transferring the funds.”
They represent key steps after execution. When do we communicate with employees? What will be the place of each in the new organizational structure? How do we integrate their commercial contracts? – as prominent as the transactional stages.
Consider employee onboarding. After the conclusion of an agreement, your organization will instantly gain a certain number of new colleagues. They come from a company with a different culture, compensation philosophies, and catered lunch attitudes. Everyone will worry about their role and whether they will change or cease to exist.
Successful acquirers prepare for this by ensuring new employment packages are ready and town halls are scheduled. They ensure that proactive and individual awareness-raising of the employees concerned takes place.
In the heat of the moment, it may be necessary to reduce the moving parts and focus on what “matters” to get the deal done. Since it’s impossible to pre-load everything, plot the integration schedule on the timeline to see how much you can insert in the trading window and what can wait.
Take the time to onboard your advisors
Most companies outsource much of the bulk of the M&A work to outside advisers: lawyers, accountants, investment bankers, etc. better. This means investing time in your advisory teams and asking them to make the same investment in you.
Your advisors need to know your organization: who the key decision makers are, who to call when they spot a strange IP issue, and your top “concerns”. This knowledge accumulates over several projects, but it can be accelerated by investing time outside of a transaction to do client listening and CLEs, so that your advisors really know you before a transaction begins.
It may look like sales or introductions when outside advisors offer these services, but take them for what they are: a desire to get to know you better so they can be more effective.
In summary, your inorganic growth strategy will be more likely to lead to the accretive results you want while disrupting operations as little as possible if you treat M&A as a capability, not an event.
This article does not necessarily reflect the views of the Bureau of National Affairs, Inc., publisher of Bloomberg Law and Bloomberg Tax, or its owners.
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Derek Liu and Aarthi Belani are partners at the San Francisco Bay Area-based law firm Baker McKenzie and work on large-scale mergers and acquisitions and other complex transactions for technology and life sciences companies around the world entire.