M&A: Five Tips for Success

Mergers and acquisitions are an important strategic tool for companies of all sizes – to grow top-line revenue, add new offerings and/or acquire talent.  Here are top tips to attract ideal companies, ensure appropriate valuation and deliver on operational integration.

Build Networks    First and foremost for any company interested in acquiring is to cast a very wide net.  You need to build networks with small and large companies, VCs, PE firms and others who are part of the deal flow ecosystem.  A well-tended network will ensure you know when an asset is available.

Be Prepared to Vet a Lot of Companies  In the past it was taken for granted that larger companies could squash or ignore start-ups that were nibbling at the bottom of the food chain. But today smaller and smaller companies are being acquired – for technology, for talent and/or for market share.  Therefore acquirers must have a relationship with a greater number of  companies, at earlier and earlier stages.

Valuation can be Relative   There are times when it makes sense to stretch valuation beyond standard metrics.  Sometimes it is more important to accelerate an acquisition as part of a broader business strategic.  Therefore the value may be higher for your company than for a different acquirer.

The Highest Price Doesn’t Always Win the Deal  A company with a solid history of making acquisitions may be perceived as more serious.  Therefore if your company is newer to the acquisition arena, make sure the target company understands the import of your intentions.

Integration, Integration, Integration  Post-acquisition planning is critical.  While the acquisition process can be very demanding, it’s important to ensure resources, including time and energy, to post-acquisition processes.   A post-acquisition plan should include not only operations and systems, but also cultural aspects to ensure similarities are emphasized and the value of the acquisition is maintained.

CFOs are ideally placed to articulate the acquisition goals of a company such as filling a gap with a tuck-in acquisition or adding “another leg to the stool” with a new technology. By staying in the mix of the deal ecosystem, negotiating the appropriate valuation and ensuring post-acquisition integration, CFOs can ensure their companies’ success in using M&A  as a competitive advantage.