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Serial Acquirers’ Five Secrets for Success

Aug. 19, 2022, 8:00 AM

Gen. Omar Bradley once said about war, “Amateurs talk strategy. Professionals talk logistics.”

The same applies to mergers and acquisitions.

After decades of collective involvement in M&A with some of the largest serial acquirers in tech between us, we can say that those that do deal-making well treat it as a repeatable process. We explain five of their best practices.

Start With the Team

Everyone in your organization has a day job. But when an M&A project arises, the usual expectation is that everyone stretches to get the job done. This frequently means working until after hours, which can quickly lead to process delays.

Successful acquirers dedicate head count to M&A, usually in corporate development and in legal, recognizing that M&A is at least one person’s full- or part-time job. This individual (or team) primarily serves as a project manager.

They coordinate internal teams and outside advisers and are the day-to-day face of the organization to the counterparty. Over time, they also become the repository of the institutional knowledge for future projects.

Successful acquirers also ensure that non-dedicated team members are sufficiently trained on the deal process. M&A is inherently time-constrained, and you don’t want to figure everything out on the fly.

Firms like ours offer full-day bootcamps for the key participants of a transaction, covering basic concepts like due diligence, closing conditions, and indemnities.

Figure Out the Decision-Making Process

M&A means working toward a deadline with imperfect information across a counterparty that is likely doing it for the first time. Under these circumstances, applying approaches that you would use in day-to-day business decision-making—Let’s hold a meeting! Let’s run it by the CFO!—creates bottlenecks.

Multiple bottlenecks create cascades of delay. These delays either stall the overall project or result in a mad scramble at the end, resulting in imperfect decisions being made simply to get the deal done.

On-the-ground decision making is crucial: senior management cannot be expected to read every diligence report and every representation and warranty, but most outside advisers want some input from the client team on key matters.

Successful acquirers empower their on-the-ground team leading the project to make decisions. They schedule check-ins with senior management and the board for status updates and key decision-making on a predictable cadence.

Senior management must empower the negotiating team with flexibility to get the deal across without always having to run back for permission.

Lead With Your Philosophies

Many of the same issues come up repeatedly in M&A, such as whether to offer stock, assume options, reinvest deal proceeds, or accept rep and warranty insurance.

In advance of the transaction, have a “this is how we do things” conversation with all key stakeholders. This simplifies decision-making so you can communicate your value points effectively to targets.

This exercise can involve drafting a set of template documents, with your team making decisions as if engaged in a live transaction, but with the luxury of time to get those decisions right. Once completed, you will be significantly more efficient when it comes time to execute.

That said, the forms are only a pathway to crystalize decision-making, so do not get overly attached to them. Deals may get done on different acquisition structures or in different countries.

Map the Entire Deal Including Integration

Successful acquirers have a timeline that maps out the entire process, not just “sign the letter of intent” through “wire the funds.”

They account for key post-execution milestones—When do we communicate with employees? Where will everyone fit in the new organizational structure? How do we integrate their commercial contracts?—as prominently as the transactional steps.

Consider employee on-boarding. After a deal closes, your organization will instantly gain a number of new colleagues. They come from a company with a different culture, pay philosophies, and attitudes toward catered lunches. Each will be anxious about their role and whether it will change or cease to exist.

Successful acquirers prepare for this by ensuring new employment packages are ready and town halls are scheduled. They make sure that proactive, one-on-one outreach to affected employees takes place.

In the heat of the deal, there can be a need to reduce moving pieces and focus on what “matters” to get the deal signed. Since it is impossible to front-load everything, plot out integration planning on the timeline to see how much you can squeeze into the negotiation period and what can wait.

Take Time to Onboard Your Advisers

Most companies outsource much of the heavy lifting in M&A to outside advisers: lawyers, accountants, investment bankers, etc. The temptation may be to hire the “best” that your budget allows but consider using different criteria—hire the advisers that know you the best. This means investing time in your adviser teams and asking that they make the same investment in you.

Your advisers should know your organization: who the key decision-makers are, whom to call when they spot a weird IP issue, and your key “care abouts.” This knowledge accumulates over multiple projects, but that can be accelerated by investing time outside of a deal to do client listening and CLEs, so your advisers really know you before a transaction starts.

It may feel like sales or pitching when outside advisers offer those services but take it for what it is—a desire to get to know you better so that they can be more effective.

In sum, your inorganic growth strategy will be more likely to lead to the accretive outcomes you desire while minimally disrupting operations if you treat M&A like a capability, not an event.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Author Information

Derek Liu and Aarthi Belani are partners with the law firm Baker McKenzie, based in the San Francisco Bay Area, and work on large-scale M&A and other complex transactions for technology and life sciences companies around the world.