M&A: Optimizing for Value Creation

With M&A, most companies are focused on deal execution, and not enough time is spent on value creation. In fact, most companies aren’t optimized for creating value with M&A, which requires rethinking the approach to M&A.

M&A is a 4-quarter sport. M&A strategy and advisory is the 1st quarter. Deal execution is the 2nd quarter. Integration is the 3rd quarter. Deal Realization is the 4th quarter.

Companies utilize different coaches and different teams for each quarter without anyone overseeing the entire game from beginning to end. A consistent game plan and team management is required to keep everyone focused on the same end goal.

Below are 5 key ways that companies can begin optimizing for value creation.

• Deal Manager: Companies need to empower a new role in M&A: deal manager. This is not project management; the deal manager must have the knowledge, experience and authority to make the deal successful. The deal manager must understand each aspect of the deal and how all the different activities relate to value creation.
• Guided Deal Execution: A lot of time and energy is wasted in deal execution. Specialists are brought in to perform specific tasks, but each specialist is not positioned to understand how his or her activities relate to the ultimate deal success. For example, due diligence is handed off to associates and other junior team members to look at specific issues. However, the due diligence process is fantastic opportunity to understand how the target was run, the skills sets of team members and potential problems. Buyers need to optimize around deal execution to gain deeper insights.
• Experience Driven Strategy and Advisory: M&A strategy and advisory roles need to be filled by people with proper deal experience. They need deal execution, integration and optimization experience. Any deal can look good in theory, but an experienced deal person will be able to identify and troubleshoot potential issues before deciding to proceed with a deal.
• Focus on Deal Realization: Most companies only play the first 3 quarters, and lose the game in the 4th quarter. The 4th quarter is left to chance and is not actively monitored by the CEO or the deal advocates.
• Acknowledge and Address Problems: Deals don’t always go as planned. This is the nature of M&A. The strategy may prove to be unsound; the execution may be poor; the competitor may have seized on customer fears of M&A integration. The important thing is to quickly acknowledge when things aren’t working out, trouble shoot the likely cause, and take corrective action.

Once companies recognize M&A is a 4 quarter game, they will start to understand that M&A deals must be managed across all 4 quarters and how to optimize for value creation. M&A is not about getting the deal done, but creating value through M&A.