Over the past several years merger and acquisition activity has heated up substantially in both the public markets and the middle market. The increased deal making in businesses selling for $1 million to $50 million has created opportunities, but it has also caused attention to the special problems of working in this market. With little or no public information available, few compatibles and even fewer financial controls are seen than there are in large corporations, the value of a company in this category can rise or fall dramatically according to the findings of a financial due diligence evaluation. Indeed, entire deals can sink or swim based on the due diligence process and on the steps taken will advance to ensure success. The key to successful M&A is a repeatable model; one that companies can return to over and over again to reap substantial rewards. The virtuous cycle for M&A begins by building a strong M&A capability that forms the foundation for the success of your business in five key steps:
- Corporate strategy and acquisition strategy: Develop a clearly articulated strategy and an M&A plan that reinforces that strategy.
- Deal thesis: Invest with a thesis. Successful deals are guided by a meaningful deal thesis that is tied to a firm’s growth strategy and that spells out how the deal will add value both to the target and acquiring company.
- Strategic due diligence: Ask and answer the big questions. The best acquirers investigate targets with a nose for what’s really important, identifying the key sources of ongoing value and sniffing out any “perfumed pigs” buffed up for sale. A frequent acquirer knows exactly where it can add value and is therefore able to set its own price—and to walk away if the price isn’t right.
- Merger integration planning: Integrate where it matters. No two integration platforms are the same, and companies must carefully consider aspects from culture to IT in order to realize the full value of the deal.
- Merger integration execution: Nail the short list of critical actions. Merging two companies requires rigorous follow-through on a long list of integration tasks, large and small. Doing both is hard. Part of the answer lies in a few, powerful guiding principles: tailor the integration thesis to the deal thesis; integrate where it matters; and act with deliberate speed.
At AcQyro LLC, we apply our expertise to guide companies and management teams that are deciding where to grow and shed through joint ventures and alliances or divestitures and separations.