3 Handy "Don'ts" for M&A Success

Avoid Pitfalls Not Mentioned in the Playbooks

Over our years of working on transactions, we’ve seen a lot--lots of good things and lots of bad things.  Last month we addressed the Three Handy "Do's" for M&A Success.  This month we’re looking at the Don’ts.

Don’t Number 1: Don’t Treat M&A as a Strategy in Itself

Companies that treat M&A as a strategy often build impressive deal engines. They get good—sometimes great—at due diligence, negotiation, and even integration. But in our experience, these same organizations frequently struggle behind the scenes. Deferred integrations leave them with disconnected systems, post-merger performance is hard to track across multiple acquisitions, and a true team culture can erode as key people focus on the next deal instead of making the combined company stronger.

For the best companies, however, M&A isn’t the strategy: it’s a tool for executing one. Before pursuing an acquisition, it’s worth stepping back to consider:

• Strategic fit: If you were to acquire Company X, how likely is it to truly achieve your goals? Have you explored alternative paths like organic growth, partnerships, or alliances? 

• Capital structure: How will you fund your acquisition, and how will funding that acquisition affect your ability to pursue other initiatives? 

• Total cost: Beyond purchase price, what are the full financial and resource demands—including advisors and internal bandwidth?  Where will you get optimal bang for your buck?

One final takeaway: When an acquisition is tightly aligned with strategy, challenges that arise along the way tend to be easier to navigate—because the right answers simply make sense.

Don’t Number 2: Don’t Separate the “Deal Team” from the “Integration Team”

 Many companies divide responsibilities between two groups: the deal team (often in Finance) and the integration team (often in Operations or the PMO). While each usually brings the appropriate skill sets, the gap between them creates risk.

From a financial perspective, the assumptions are arguably the most important factors in the financial model – many hours are invested by the team and business units on these assumptions, of which only the final decision ends up in the “number” in the model.  The discussions that shaped those assumptions created in due diligence need to be relevant in the integration.  And no “hand off meeting” can adequately solve this issue.

Similarly, there are often important issues revealed in due diligence, some of which cannot be truly understood to be relevant until the integration is under way.  Closing issues by simply following a playbook risks missing the important context of a deal.  Specifically, we have seen this issue around sales processes, compensation and sales approval processes – things that were simple when modeling became very complex when impacting commissions and paychecks.

To improve the odds of success, ensure that those who made the assumptions have significant input (and time to make that input) in the integration phase.

Don’t Number 3: Don’t assume that “If we do it here, it must be right”

 We get it.  Integrations are often added to busy people’s jobs.  Done after 5:00pm.  So, moving quickly with some “rules of the road” can make easier and get through the integration phase with less pain.  But CorpDev Consulting would urge you NOT to rush and be mindful about what you’re doing.

One of our sayings is that Corporate Development is in the role of making 2+2=5.  Sure we have a model, but it is imperfect.  For every situation where the assumptions come up short, there is potentially a way to find extra value – something overlooked at the outset.

Our experience shows that by critically examining processes in the target you may realize that there is a better, faster or more efficient way of doing things.  How do they refer business inside the company?  What is their sales management process?  What is their post-sale follow up tool?

Sometimes, the better way isn’t your way—it’s theirs. If you’re buying a company you admire, take the time to look critically at your own processes as well as theirs.

With nearly a century of combined experience, CorpDev Consulting has helped hundreds of executives navigate both the success factors and the failure risks of M&A. Every company and every deal is unique—but avoiding these Don’ts can help ensure you land in the small percentage of transactions that achieve real, lasting success. Contact us to talk about your deal strategy today!