Deal Team 6: A study in Acquisition Precision

Currently, I am advising an industrial manufacturing company on the sale of a division. This project reminds me of the disciplined process our deal team at Primedia/Intertec used for many years to execute probably 30 plus buy/sell transactions over just a few years. Back in the day, we essentially functioned as a deal factory while we executed a leveraged roll-up business model for a PE firm.

On a consistent basis, we were evaluating, negotiating, integrating and selling businesses. Often, we had 4 to 6 deals in one stage or another of the process at any one time.

Working with this volume of deals lead us, over time, to develop a highly disciplined M&A and deal integration process. Our process was totally dependent on an internal team of experts. That team functioned like a well-oiled machine, required a tremendous amount of mutual trust and over-the-top inter-team communications.

Most often, the team consisted of at least 6 executives/department experts. They included:

  • CEO/President
  • VP of M&A and Strategic Planning
  • CFO
  • CTO
  • VP of Production and Manufacturing
  • Division Executive who would own responsibility for the business once acquire

With my current industrial manufacturing client, we recently met with a potential strategic acquirer who is also on an aggressive acquisition growth track. They arrived for a meeting with my client and, like we used to do back in the day, brought in their corporate team of experts. Deal Team 6.

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They had clearly done their homework on the business, reviewed all of the material on the business in detail. They proceeded to utilize meeting time in a highly efficient and effective manner to extract the maximum amount of diligence information.

This company’s M&A/deal team worked in tandem. They easily played off of each other’s questions, based on the answers they received. So often, an unexpected answer to one specialized department question has ramifications for another discipline in the company that can often have serious ramifications for the successful integration of the business if not fully explored.

In all cases, the CEO wisely deferred to his team to go through their specialized diligence check lists. At the right time, he would add the appropriate context or clarification question as required to fill in the blanks on a big picture basis. This gave him invaluable info needed to best assess how this potential acquisition would fit with his company strategically, technically and, not to be under-emphasized, culturally.

Here are 4 key reasons why this disciplined team approach to acquisition assessment is so effective and leads to a much higher rate of successful business integration.

  • Every member of the team, hears all questions and answers. This builds a broad understanding of and far deeper background on the business than can possibly be gained from reading a Deal Book or gaining knowledge second-hand from someone who was there.
  • Each Deal Team 6 member gains an understanding of the business on an intuitive level as well. They see the facilities and gain an intangible perspective on the business that can only be developed by meeting the selling company management face-to-face. There’s an element of context and intent that adds invaluable color to what otherwise might simply be a sterile, factual or suspicious answer to a question. To put it another way, it’s one thing to look at a photo of the Eifel Tower but something completely different to experience it in person.
  • Once the deal is done, The Deal Team 6 then owns the responsibility to effectively integrate the new business into the parent company. There is a tremendous art and science to deal integration that I will address in a separate blog.   Needless-to-say, deal integration success improves exponentially with a Deal Team in place and a highly organized and disciplined process.
  • If the CEO allows his Deal Team 6 to openly assess the Strengths, Weaknesses, Opportunities and Threats of the deal at the end of the diligence process and those attributes are heard and fully vetted, the Team becomes more cohesive and motivated to deliver results because they were heard and concerns and ideas were addressed should the CEO choose to close the deal.

Merger, acquisition and integration work is a combination of art and science. It is infinitely more effective and successful if approached on a team basis, leveraging the collective knowledge and experience and, with a rigorous process in place.

Note: If you have an interesting and/or educational CEO story of Head Noise caliber, write to me at cbishop@capitusgroup.com. I’d love to speak with you and share your story in my Head Noise blog. You can tell your story either on the record or, without attribution.

Cameron Bishop is a partner with The Capitus Group. The firm provides comprehensive business value enhancement and transition strategy solutions. Partners and Advisory Directors comprise an experienced team of business professionals who have successfully owned, run, grown and sold companies. Capitus utilizes proven value enhancement and risk reduction techniques to enable superior transition options.

 

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