As an investment banker guiding private equity firms, family offices and large private and public corporations through the acquisition process, I have had a front-row seat to brilliantly executed acquisition strategies. Companies that develop M&A expertise deliver higher returns than companies that rely solely on organic growth. Unfortunately, I have seen good strategies that were poorly executed.
Here are a few key things to consider when developing core acquisition competencies that can enhance outcomes.
It is crucial to develop a compelling strategy with clear objectives. Successful strategies start with identifying investment rationales. For instance, a company facing weaknesses in its product and service lines may opt for an acquisition strategy to fill those gaps and add talented individuals who align with their values. Thorough research and screening of potential sellers are essential before making an offer. Capable buyers know exactly what they want and have the discipline to align the strategy with their corporate vision. Working backward from there, a buyer may translate overarching growth goals into a set of tangible, objective target criteria.
Building strong relationships with sellers is crucial. Buyers should not solely focus on their own needs but also consider the needs and emotions of the sellers. Selling a business is a weighty decision for owners, impacting various aspects of their lives. Effective acquirers prioritize transparent communication with owners, fostering enduring and trusting relationships. Treating every interaction with sensitivity and respect is key to building trust. Trust enables buyers to openly discuss their plans, even if those plans may be disruptive. The relationship-building process starts from the first call, and sellers appreciate authentic and genuine approaches.
Acting swiftly is another important behavior for effective acquirers. Sellers perceive delays and unresponsiveness from buyers as disinterest, potentially ruining good opportunities. Therefore, buyers must recognize a good deal when they see it, and act expeditiously to develop transaction momentum and ensure the seller’s commitment to the process.
Due diligence plays a critical role in the acquisition process. Buyers rely on due diligence teams to thoroughly examine every aspect of the seller’s business, including financial, commercial, human resources, legal, environmental, IT processes and more. Proficient buyers have their team ready in advance, allowing them to start the review process promptly after signing a letter of intent. A disciplined approach to due diligence, driven by a sense of urgency, leads to a smooth closing and avoids surprises thereafter.
Lastly, effective acquirers develop concise post-closing integration plans. Converting potential revenue uplifts and expense efficiencies into performance requires a lot of thought, structure, hard work and accountability. Successful buyers hit the ground running on the day of closing, implementing 30-day, 60-day and 90-day plans with transition teams from both the acquirer and the seller. In contrast, less skilled acquirers often neglect integration planning, leading to unrealized returns.
While a well-executed acquisition strategy can drive limitless upside, realizing these outcomes requires specialized knowledge, adept buyer behavior, and avoiding self-inflicted wounds along the way. Alignment with the company’s long-term vision, systematic preparation, readiness to ac, and systematic integration plans are among the keys to driving intentional outcomes as a routinely successful acquirer. ●
Sara Clevenger is a Principal at Blue River