Acquisitive business growth is used by some of the most iconic and largest businesses in the world. However, this approach doesn’t only have to be the domain of large companies. Smaller companies can also accelerate their growth but this comes with a warning that it needs to be done properly to avoid costly mistakes.
To be truly effective at growing acquisitively you need to build a strong M&A capability, which involves building a dedicated and skilled M&A team tightly integrated into your management team and running a first-class acquisition process, including some of the good practices as set out below.
1. Assemble the Core Team
a. Buy-Side Advisor/Investment banker:
The buy-side advisor guides and coordinates the overall process. With their in-depth knowledge and skills as well as their network of potential markets and professional advisors, they’re able to assist in structuring the deal optimally. For small to medium sized businesses this role will usually be outsourced.
b. Accountant and tax advisors:
An experienced accountant is crucial for performing a thorough financial due diligence to ensure there are no tax risks. They scrutinise the financial position and results of the target company; plunge into high-risk areas and identify potential financial risks.
c. Lawyer:
A lawyer, specialising in M&A, is essential for navigating the numerous legal complexities in the world of M&A. They handle the legal due diligence, draft and review contracts, and ensure compliance with all regulatory requirements.
d. Internal Management Team:
Your core management team should be an integral part of the acquisition as they have the best industry knowledge, they provide insights into the strategic fit of the acquisition, and they are the ones that will have to implement the deal and integrate the acquisition into your business. These should include all top executives such as the CEO, CFO, IT and HR.
2. Incorporate Specialist Roles
a. Industry Expert:
An industry expert, preferably from within your company, will provide valuable insights into the market dynamics and competitive aspects of the industry in which the target company operates.
b. IT Specialist:
In today’s digital age, IT systems are crucial, and can become a big issue when trying to integrate the businesses. An IT specialist should be involved as early as possible to evaluate the technological capabilities of the target company and assess the integration requirements for the target.
c. HR Specialist:
Human resources are often overlooked in M&A. The single biggest reason for an acquisition failure is the inability to integrate the culture of the acquirer and acquiree.
An HR specialist ensures that talent and cultural aspects are considered, which are key to a successful integration.
3. Establish Clear Communication Channels
Clear and consistent communication is essential for an efficient M&A process. Establishing regular meetings and updates ensures that all team members are aligned and can address emerging issues promptly.
4. Define Roles and Responsibilities
Each team member should have a clear understanding of their roles and responsibilities. This clarity avoids overlap and gaps in the M&A process, ensuring that all aspects of the deal are adequately covered.
5. Ensure Flexibility and Adaptability
The M&A process can be unpredictable. The team should be flexible and adaptable, able to respond to new information and changing circumstances quickly.
6. Prioritise Due Diligence
Due diligence is the cornerstone of any M&A process. Ensuring thorough commercial, financial, legal, and operational due diligence helps to accurately assess the value of the target and identify potential risks.
7. Focus on Post-Merger Integration
Successful M&A is not just about closing the deal, at its core it is about effectively integrating the acquired company and ensuring that the synergies identified are realised. Unless purposefully managed, integration of the newly acquired businesses won’t happen and the synergies identified won’t be realised.
In conclusion, building a strong M&A team is a strategic process that requires careful selection of diverse experts and a clear definition of roles and responsibilities. A well-structured and collaborative team, following best practice, can navigate the complexities of M&A, driving successful outcomes and adding significant value to your business.
Remember, the strength of your M&A team and use of best practice can be the deciding factor between a deal that adds substantial value to your company and one that fails to meet its objectives.
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