Attendees from past workshops learned that success is truly in the details.
By Jack Prouty, President of the M&A Leadership Council
As a Program Manager, you're likely accustomed to diving into the details of every process and procedure. And while the oversight of M&A transactions certainly requires an intense attention to detail, it also requires an equal focus on the strategic rationale for each acquisition, which is the foundation of every deal. By using the strategic objectives to guide tactical decisions and actions, program managers can maximize the value of every transaction.
That's why our executive training program The Art of M&A Program Management doesn't just focus on the details, like what should be included in team status reports and how to establish functional meeting cadences. It places M&A program management in the greater context of the priorities and objectives at each stage in the M&A life cycle, given the investment thesis of the deal, i.e., the deal rationale. This "big idea" was one of many that attendees ranked among their most valuable takeaways in prior workshops. Here are five other big ideas they took away from this invaluable training.
Big Idea #1: Build internal M&A capabilities first.
How many people on an M&A deal are working on an acquisition in addition to their regular "day job"? Yet managing acquisitions often requires additional skill sets beyond what is needed in your normal functional role, be it accounting or operations. It's important to address that capacity gap from the very beginning, as your organization considers getting ready to do an acquisition.
- Train and on-board the diligence and integration teams on the M&A fundamentals required for planning and executing a successful deal.
- Complete "as-is" process maps of your organization's current business functions as a framework for evaluating business fit and differences with the Target's business.
- Develop and document your overall M&A process workflow, tools and templates, which will serve as the "how-to" manual for the team and help you build your M&A playbook.
- Determine your program management infrastructure and prepare to launch the Diligence Management Office (DMO), along with the Integration Management Office (IMO).
Organizations commonly skip these steps, leaving them ill positioned to effectively execute an acquisition. It's far better to identify and address your capability gaps before entering a transaction. Then you are equipped to fill in those gaps, either through specialized M&A training for key employees, or through hiring more resources specifically for managing acquisitions.
Big Idea #2; Align the deal KPI's with the deal-type DNA.
What, exactly, is deal-type DNA? Deal-type DNA refers to the fact that each deal should have a primary purpose: to create scale, increase scope, diversify, etc. How you measure the success of the deal, that is, the key performance indicators (KPIs) should be based on the primary purpose of the deal. If the purpose is to increase your scope (for instance, to expand your products and services, or your geographical footprint), then your KPI's might be increased share of customer's wallet; average number of products sold to customers; and other measures that demonstrate that the acquisition directly resulted in providing a wider range of products and services to your customers, such as serving a greater number of geographical markets; and becoming more of a full-service provider.
If scale is your primary acquisition purpose, then the KPI's would include benchmarks that demonstrate you have achieved benefits of industry consolidation; increased market share; back-office economies of scale; better purchasing leverage with suppliers, etc. The key point is that the metrics for measuring deal success should be based on and support the primary purpose of the acquisition.
Big Idea #3: Refine roles and responsibilities, starting with establishing governance.
Mergers and acquisitions have countless moving parts and complexities; outlining clear governance is critically important but often done poorly. The purpose of governance is to clearly outline and communicate how the due diligence and integration will be structured and managed; the roles and responsibilities of the various players; and most importantly, how the Buyer and Target will work together between Announcement Day and Close.
The governance structure should outline "rules of engagement" not only for senior management of both organizations, but also for the integration teams and rank-and-file staff members. The governance structure should accomplish the following:
- Establish clear roles for specific activities and deliverables, such as who will be responsible; who will be accountable; whom will be consulted for input; and whom will be kept informed about status and findings. This keeps people focused on their roles and responsibilities.
- Create and publish specific organization charts, charters and responsibility descriptions for due diligence and integration teams.
- Empower decision making to the appropriate level and provide a process for escalation to higher levels when executive decisions are required.
- Provide adequate business focus and leadership visibility for maintaining the core operations and results in the planning and implementation of key actions.
Getting governance right is a critical strategy because it sets the tone for refining all roles and responsibilities. For Program Managers, the launch and charter of the DMO and IMO are often the most important governance task because that sets the structure, coordination and foundation for all other work stream charters.
Big Idea #4: Culture is everyone's responsibility.
One of the greatest challenges of just about any M&A deal is adequately assessing the Target's culture. There usually isn't enough time or access to conduct an extensive culture analysis during the due diligence effort, but certainly there are actions you can take to identify culture differences. In spite of limited access to key people and information, Program Managers can still play an important role in the cultural due diligence process:
- Treat every interaction with the Target company as an opportunity to make cultural observations.
- Remind your work stream leads to look for cultural clues.
- Add culture as a topic at your DMO Roundtable discussions with Target executives.
- Ensure that you have a recent baseline of your own company's culture for comparison.
It's especially important that everyone is looking for potential cultural "flashpoints," emotionally significant traditions that carry disproportionate risk to very little gain. These differences often aren't discovered until it's too late, and they can cause irrevocable harm.
Big Idea #5: Adapt and apply--don't invent.
While every M&A transaction might have unique deal-type DNA, it's not necessary to start from scratch for every deal. On the contrary, one of your goals as a Program Manager is to create a repeatable process that can be adapted for different scenarios. Rather than treating your M&A playbook as a prescriptive manual, treat it as a living document that provides a starting framework for every deal.
- Your playbook should outline the overall M&A process, objectives, tasks, roles, responsibilites and dependencies throughout the M&A life cycle.
- Note that an M&A playbook is much more than a collection of templates and checklists. It is a central location for all your approved tools and templates, along with work samples and best practices.
- Meanwhile, also keep in mind that a playbook alone isn't enough in and of itself. Your team also needs a solid process overview--grounded in the deal strategy--as a guide to identify, define, coordinate and align all executive and functional requirements.
Think of your playbook as an entire series of artifacts, samples and skills needed throughout the deal life cycle. For each deal, your team can draw on these artifacts, adapting and applying them as appropriate.
Looking for more big ideas and insights? There is still time to join us for The Art of M&A Program Management in Scottsdale this April. This workshop-style training is designed specifically for due diligence and integration directors, managers and project managers; work stream leaders; and other key executives responsible for building a more robust, repeatable M&A capability in their organization. Register today.