How do you select the organizations that create the best synergies in the markets they are entering? What can you do to develop an edge when you’re buying a business? How can David successfully take on Goliath in M&A activities? Let me share the M& A mindset I’ve learned in over 30 years of buying and selling organizations.
You must pick the best person to lead your M&A activities. This person must be very good at telling your story and have the time and temperament to complete critical activities along the acquisition’s timeline. Knowing how to talk with a founder when they choose to sell can make a huge difference in how the deal works out.
I’ve found many times when entrepreneurs do make the decision to acquire a company, the leadership team decides who will lead the acquisition team based on who has the lighter schedule at the time. Seldom do they assign the best person to the project.
For this reason, many midmarket companies have consultants help them with their acquisition process. Depending on how many acquisitions you are planning to do, developing a core competence in strategic acquisitions can pay many benefits.
Let me see if I can help improve your success by sharing several key parts of a successful M&A mindset. When I’m involved with my clients, I have them identify a key person who is responsible for managing the many moving parts inside their organization.
In many cases, I do much of the early work outside the organization to help set my clients up for success throughout the full M&A gauntlet, from initial target selection to integration after the deal closes. I then put my M&A mindset to work on building an extraordinary business.
The first step of having a strong M&A mindset is to understand clearly why an acquisition should be made. M&A is not a strategy that can work well if it is not aligned with your business strategy and growth objectives. It is only one part of your growth strategy.
The second step of having a strong M&A mindset is to choose the best person to lead the process. From my experience, this person must have similar skills as the leader of the business while knowing how to engage and empower a very wide range of stakeholders, both inside and outside the organization. They must know how to lead, but also must be able to influence people who are under tremendous pressure to protect their own interests.
They also need to have a good sense of humor, because acquisitions are very complex. It’s not if something may go wrong, but when and can they get back on track. From what I’ve seen in my over 70 deals is the best leaders for these projects are very good at helping others see what’s in it for them to help throughout the entire process. Over 90% of the failures I’ve seen come from people problems.
The third step of having a strong M&A mindset is to settle on one key objective for the acquisition. By defining the acquisition criteria clearly, you rule out many potential problems before you start. Many missteps occur when executives try to accomplish too many things with a single acquisition. You would be better off buying an organization that has an extraordinary product or service than buying one in the hopes you can improve the quality of what they have to offer.
The final step of having a stronger M&A mindset is to learn how to read the culture in the organizations you’re buying. Culture is not just the founder of the business telling you about their business is. It’s about the people who work with customers on a regular basis. A great culture helps lift your organization to the next level. A bad culture can kill the whole organization when acquired.
If you add these steps to your current M&A process, you increase your success significantly. Miss any one of them and you may end up with the deal from hell. Sorry, heck.
I know I’ve shared a lot today. Don’t worry, starting in February we will launch a new online blog for entrepreneurs who want to know more about successfully buying and selling businesses! We’re still finalizing the details. It will be a companion site to my book that is coming out in early 2017 on the subject. The best thing is we will be partnering with you to create the material we share both on the site and in the book.
See you next week when we talk about how successful partnerships can help grow your business faster. See you then.