M&A may be inherently complex, but that’s not to say it cannot benefit from repeatable processes. Moving M&A from a decision shrouded in secrecy to a transparent and systematized process may be the key to decreasing both risk and complexity.
For many employees, the process of mergers and acquisitions emanates from an opaque box. The decision to acquire a company is often announced in almost surprising fashion, and the integration details are punted over to IT, finance, and other departments to “figure out” on their own. Yet by adding transparency and repeatable processes, M&A can go from magic to an intuitive and repeatable process which enables integration teams to hit the ground running; thus increasing chances of integration success.
Funnels, Scorecards, and Game Boards
Acquisitions start with a strategy. Yet that strategy is rarely clear to the entire company. While strategy socialization is another topic for another day, it’s imperative that enterprise leaders understand the current and future-state portfolio of the company. Put simply: everyone needs to understand what the future corporate portfolio looks like in terms of products and services. Additionally, having a “funnel of opportunities” with stack-ranked or “scorecarded” companies to satisfy portfolio gaps is a highly intuitive way to get all M&A stakeholders on the same page rapidly.
Let’s take a look at a fictitious scenario: a marketing company with an existing and relatively solid CRM product who wishes to expand into the marketing platform space. To do so, the company may need to acquire the following functionalities:
- customer data platform (CDP)
- email service provider (ESP)
- content management system (CMS) capable of hosting campaign landing pages (LP)
These products are required in order for this fictitious company to be considered a contender to market incumbents such as Adobe, Salesforce, and Oracle. All of these components together make up the platform, or “game board” as we refer to below:
Believe it or not, simply conveying the portfolio/platform game board is a huge win. That’s because many employees within the enterprise previously had no idea what it takes to go from a marketing product company to a marketing platform company. With just one simple graphic, now it’s clear as day.
So now this company has a game board of its future portfolio, but how do we fill the gaps? That’s where funnels, filled with stack-ranked / scoredcarded acquisition targets come into play.
The manner in which each company is selected involves scorecarding; a methodical process which scores companies on a variety of factors, often determined collaboratively between product management and product marketing. Regardless of how the companies are selected, it’s important to have more than one company in the funnel as some acquisitions targets will be further from reach than others.
If these artifacts look familiar, that’s because they come from the CRM and sales-ops world; a world where predictability is paramount. So rather than reinvent the wheel, why not leverage tools which are both common and battle-tested?
A Repeatable and Intuitive Approach
Determining which company to acquire is only a piece of the puzzle, and it’s no trivial piece! Market examination (TAM, etc) and heavy product analysis must take place before a logo appears within a funnel. Moreover, acquisition selection has its own set of sub-steps, from awareness to interest to mutual acquisition agreement.
Additionally, once a company is selected for acquisition, it’s by no means “game over” for the analytical side of the M&A team. Integration archetypes and other coexistence strategies must be provided to the integration team(s) to ensure integration success.
Yet the key takeaway here borrows a paradigm from consumerization: take something complex and make if familiar, approachable, and intuitive. This relatively low-effort / high-return approach can only increase your odds of M&A success.
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About David Torre
David Torre is a business technology veteran with years of experience coupled with degrees in both information systems and business intelligence. This combination of skills has enabled David to provide enterprise solutions to well-known companies who face some of the toughest challenges in the business world today.
David currently resides in the San Francisco Bay Area where he runs Center Mast, LLC.