There is no doubt that the pursuit of certainty in M&A is on the rise. With the advent of new rules and regulations pressing boards and corporate leadership, M&A deals are not only better scrutinized from the outside, but are being more deeply assessed from the inside. In a recent article in WSJ CFO Journal, it was announced that only “2.1% of deals have been scuttled as of July 31 of this year.” That is way down from a peak of 3.3% for the same period in 2009 for announced transactions. Post-announcement withdrawals are down and the reason is the “rise of risk aversion by corporate boards,” according to the article.
Risk aversion to deal making indicates that the value of certainty in M&A has finally become a driver at the board level. Certainty is the primary reason the M&A Leadership Council exists. Obviously, companies continuously pursue certainty by virtue of the people they hire, the processes they create, the way they go to market, how they build products, training, compensation, leadership and many other pillars on which a successful company is built. Most often it takes time to put all the pieces together and then refine, refine, refine.
However, growth by acquisitions has become as key in most companies as the other core business functions and more fundamental to the longer term success of the business, yet it is not given the same attention. For instance, what are you doing to grow your in-house M&A competencies and capabilities?
- You have a company strategy, right? But do you have a strategy for growth?
- Your company hires the best people possible, right? Are you hiring successful M&A people to handle your growth?
- Companies employ many training programs to hone the skills of their employees to improve performance and production. So do you have a well-defined M&A training program? Do you do any M&A training at all?
- You document your business processes, right? So do you have a well-documented Playbook/Manual for M&A? Do you have an M&A process at all? For each transaction type?
If your company has growth by acquisitions in its strategy, then the leadership needs to approach it just as diligently as it would if you were opening a whole new market or launching a new line of products. A good board will require that your deals meet a higher standard of proof that they will be successful…. from strategy through integration…. the value of certainty is on the march!
About the Author: Jim Jeffries is the founder and Chief Executive at M&A Partners. He has held C Level positions in multiple consulting companies and industry. Mr. Jeffries’ background includes P&L responsibility at various size organizations during multiple stages of growth. He is also a CEO coach and advisor in global leadership development. His particular strength is in creating organizational vision to stimulate revenue growth while optimizing returns on invested capital. He has been quoted extensively in USA Today and in recent releases of The Art of M&A book series published by McGraw Hill.