M&A Software Leaders Unite to Discuss the Impacts of M&A Software Solutions on Achieving ROI
By Mark Herndon, Chairman of the M&A Leadership Council
If you compare M&A results over the last 20 years, you’ll notice the data has barely changed. Between 50 and 70% of all deals underperform their original business objectives. Facing this very real risk, what can businesses do to improve their odds?
In February, the M&A Leadership Council sought the expertise of three M&A software (MASW) providers to answer this question. The resulting webinar, Realize the Return on Investment (ROI) in M&A Software Solutions, brought these industry leaders together for the first time to discuss the potential for MASW to address common challenges in the M&A process. Our highly distinguished panel of CEOs comprised CEO and CRO of DevenSoft® Nick Perdikis, CEO & Chairman of eKnow® Alan Croll, CEO of Midaxo® Ari Salonen, and President of M&A Partners John Bender. Their insightful discussions revealed the potential of MASW in maximizing ROI at critical junctures.
The challenges purpose-built M&A software solutions can address
To kick things off, we delved straight into defining the challenges or problems an end-to-end, purpose-built M&A software solution might address. Nick Perdikis of DevenSoft suggested businesses should first look at these challenges in two primary areas; pre-and post-close.
“The challenges cut across multiple areas of an M&A life cycle,” he shared. “When we talk to customers, the things that tend to gravitate around corporate development are trying to track the deal pipeline and manage the due diligence process. We see a lot of spreadsheets and e-mails, and that creates both a data distribution and data leakage challenge, especially if you have a large team working across multiple parts of the business.” Post-close issues are similarly suited to software solutions. “You have to build a cohesive work plan and model in order to drive the synergy realizations that are sought after as part of the deal,” Perdikis noted. “A lot of the tools that you see today tend to be disparate, stand-alone technologies. It’s very difficult to get to a single source of truth.”
Alan Croll, CEO and Chairman of eKnow, described it as both a data location and a data integrity problem. "With information spread across multiple platforms in different forms and formats, it’s certainly difficult to see the big picture." The general consensus among the experts was that MASW addresses these challenges by helping teams align on and execute critical goals and objectives. "Businesses can substantially improve M&A outcomes from gaining better visibility, building a consistent and repeatable process, and having a single source of truth for accurate and timely reporting."
Taking a step back from the specific data issues during an M&A, Ari Salonen of Midaxo also identified an overarching value-creation challenge. “Only a small fraction of M&A deals meet their objectives,” he explained. “Often a business will define the investment thesis, but won’t steer the due diligence into proving or disproving that investment thesis. We believe M&A software platforms help address this value creation challenge through better visibility, continuity and accountability. You’re defining the thesis up front, using the platform to make sure you’re focused on the right things in the due diligence, proving the value, and then actually capturing the value in integration.”
In summary, businesses need to find a better way to visualize progress, track issues and risks, and bring the team together under a core objective, with defined priorities and detailed work plan. MASW supports these requirements – so what results can you expect?
The results of using M&A Software
We’re all guilty of using the phrase ‘Return-On-Investment’ as a catch-all for any meaningful business outcome, qualitative or quantitative. Certainly, some of your results will be financial. But what should executives really be looking for M&A software to achieve?
Alan Croll cut straight to the point. “By helping to overcome the challenges we just talked about,” he noted, "you are more effective in delivering the full value of the deal. As an executive, you’ve made commitments to your stakeholders. You’ve got to deliver. And all too often, that just doesn’t happen.” Tangibly, he noted, it could mean a difference of millions of dollars. “When you look at the relative ROI, my assessment is that when effectively implemented and used, MASW will more consistently give you the greatest returns.”
Drilling down, the benefits Croll highlighted included:
- More productive use of staff, who can spend more time leading and deciding rather than chasing and entering data;
- Better collaboration and more effective communication;
- The ability to evaluate more targets and make better choices;
- The ability to conduct more thorough diligence to identify risks, issues, and points of value;
- Better planning for integration;
- Fewer, shorter, and more productive meetings at all levels via real-time reporting and transparency;
- Confidence in stakeholders that your process is repeatable and reliable; and,
- Accountability at all levels.
To demonstrate the proven value of using MASW in this context, Ari Salonen followed with results from several well-known companies. "Using the appropriate software tools has enabled faster due diligence timeframes, faster integration times, and billions of dollars in shareholder value for these businesses." While he notes that not every benefit can be directly attributed to MASW, results are enhanced by an organization's process improvements and knowledge accumulation, enabled by the software.
John Bender, President of M&A Partners, weighed in with two further benefits – control and early warning. “Value erosion can and does occur at every point in the M&A life cycle,” he explained. “M&A software should result in better control of the overall process because all the key data associated with that investment thesis is centrally housed. Secondly, you have predictive insights. A software with the right choice of predictive milestones can deliver an early warning system on when certain initiatives are off track. Unlike monthly or quarterly financial statements, which are retrospective in nature, MASW gives you the ability to more effectively understand the status, risks and issues associated with essential integration priorities and value-drivers so you now have the ability to take appropriate actions quickly.”
In essence, business leaders should expect that implementing an MASW solution will yield better quantitative and qualitative results. Whether it’s reducing the time to value, achieving synergies sooner – revenue drivers, cost savings, market expansion, talent acquisition – or navigating potential problems in real-time, utilizing the correct software can lead to a big payoff.
Selecting the best M&A software for your needs
When approaching this topic in the webinar, we wanted to go beyond a simple feature/benefit comparison. Considering the potential for confusion among users evaluating “which M&A solution is best for us?”, we asked Ari Salonen to share his thoughts first. He encouraged business leaders not to see MASW as a magic bullet; stating that even the best platforms offer limited benefits if the underlying processes are not ready. “We have told quite a few prospects and customers that they should fix their processes and streamline their approach before applying technology or automation,” he shared.
The importance of layering software onto a solid foundation was something all the experts agreed upon. “You have to make sure that your house is in good order before you implement anything,” Nick Perdikis echoed. “Otherwise, you're just going to accelerate all the problems. An important component of doing a proper and effective selection, you also need to stay focused on what problem you’re trying to address.” He suggested that too many businesses approach MASW providers with the mindset, ‘what can you do for us?’. Instead, you need to fully understand what you're trying to solve, and why.
And what if you are a good candidate to implement software for your M&A process? Remember that this will be a multi-year relationship. “You are executing a crucial strategic effort on the platform,” Salonen explained. “So, look at the credibility, experience, size, scope, and strength of your partner. Look at customer reviews and ask somebody who is using it, because there may be one platform fitting your purpose better than another. Does it have the functions and features that you need today, but also tomorrow?”
He also raised the importance of ensuring the solution you choose has additional resources to meet your needs. "It’s not necessarily software related,” he noted, “but consider the company’s scope and reach to support your requirements. If your M&A takes you abroad, will you have the 24/7 support that you need? If things go awry and you don’t have the benefit of the vendor being there, the value is lost.” Salonen also flagged the importance of security. “Your risks are going to be related to that vendor, so you must look at what they have done to make sure your information is safe,” he said. Realistically, certifications like ISO27001 should be non-negotiable.
Salonen’s approach to choosing M&A software can be defined by three key considerations:
- Vendor related – Does the vendor have a public track record and case studies? Does the vendor have resources and scope to support your mission-critical processes? Does the vendor have an audited information management security approach?
- Software related – Does the MASW have the features for solving your pain points today and tomorrow? Is the MASW simple yet robust enough? Does the MASW support other corporate development actions?
- Expertise/content related – Does the vendor offer you the expertise and knowledge to get started? Does your favorite consultant use the MASW to ensure smooth collaboration?
Finally, Alan Croll suggested looking at your company culture and the appetite for adopting a solution. In addition to being a good fit, it has to have a high potential for being embraced and adopted by your team to succeed.
Successful deployment and implementation of M&A software
With so much at stake during the M&A journey, it’s unsurprising that not all customers are equally successful in using software solutions to manage the process. With this in mind, we wrapped up the webinar with a discussion of the essential components of customer success. We wanted to know; what does best practice look like? What are the critical success factors? How can businesses effectively roll out their chosen solution?
Nick Perdikis highlighted deployment as one of the most critical phases in getting value out of MASW. “It starts with your goals and objectives,” he described. “What are you trying to achieve? How is your company internally organized? And what part of the organization are you looking to affect first?” Indeed, unless your organization is very small, MASW is likely to require a phased approach. Perdikis’ advice at every level is to communicate, communicate, communicate. “Make sure you're reaching the appropriate people and involving the right stakeholders in the implementation planning process,” he said. “As software providers, we can certainly guide you, but it's really a team sport.”
For Alan Croll, executive commitment is key. “We all know that there's a lot of excitement in doing the deal,” he noted, “but keeping the executives involved when you're actually doing the integration post-close is a key requirement for success. I would also say you need to be very clear on your governance principles and how you're going to make decisions, and then use the tool to substantiate those processes and practices. And while this is a little bit off-topic, you've got to select strong, capable leaders. Availability is not a skill. Don't pick somebody to run your integration just because they're available.”
From the viewpoint of M&A Partners, John Bender shared his opinion that best practice implementations start with the company operating model. “How does your company drive M&A from an organization, process, systems, and data perspective? Many M&A deals are focused on synergy capture, both on the revenue side and the cost side,” he described. “In your company, start with upgrading the overall processes, systems, practices, resources, skills and accountabilities for driving those results -- then you can configure your software system to meet your requirements.”
Essentially, the approach and timeline for implementation and deployment will vary based on several factors.
- Small teams utilizing MASW for corporate development functions can deploy within a shorter time frame.
- Companies deploying M&A solutions across multiple functions or business units should consider a phased approach, selecting a handful of key functional areas to begin the initial roll-out, such as HR or IT.
- For large enterprises, a rollout can take as long as six months. For middle-market companies, it might be a few weeks.
- Critical success factors for a successful rollout and adoption include prioritizing change management, developing a well-defined communications plan, and involving key stakeholders from each function during the requirements and selection process.
How to “stack the deck” in your favor
John Bender sums it up well. "You can stack the deck in your favor by: 1.) Ensuring your internal M&A processes and capabilities are sufficiently built out and ready before starting the vendor selection process; 2.) conduct the vendor evaluation process like any enterprise software selection process and be requirements-driven; 3.) make sure the chosen solution can support and enhance how your organization wants to execute M&A as opposed to accepting less-than optimal work-arounds; and 4.) create an environment for engagement and adoption, with support for your stakeholders and users to drive the ROI and benefits that you expect.
Mark Herndon, serves as Chairman and CEO of the M&A Leadership Council, and specializes in M&A strategy, due diligence, integration management, enterprise communications and leadership during periods of disruptive change. The M&A Leadership Council is an educational consortium of global professional service firms, experts, and corporate practitioners in the art and science of mergers, acquisitions, divestitures, and joint ventures. Over the past 11 years, the M&A Leadership Council and its partner organizations have trained over 4,500 executives, representing over 750 best-in-class companies from every major industry sector. The M&A Leadership Council actively supports corporate M&A practitioners through a variety of proprietary research initiatives and publications, online and onsite training programs, best practices, and an industry-first certification for corporate M&A practitioners, the Certified M&A Specialist (CMAS®).