Building In-House M&A Competencies: Creating the New Diligence Model for Strategic Buyers

Submitted by superuser on Sat, 11/23/2013 - 15:03

Companies are rethinking what should get done during due diligence and who should do it. In the past it was too often viewed as a discrete function separate from integration and best left to the financial, legal and other specialists to evaluate the target business on a stand-alone basis. Their focus was on addressing such issues as: Are assets overstated or liabilities understated? What is the proper valuation for the target company? How do we want to structure the deal from a tax and legal perspective?

The M&A Leadership Council is comprised of those deeply skilled and knowledgeable experts to assist in these highly technical areas. However, in addition to these needed skills during due diligence, the pull is being created for a greater strategic focus and scope during diligence. The best people to perform these evolving roles are the in-house corporate staff with the requisite business knowledge and functional expertise, but this also means training these people for better performing these important roles.

One of the learnings emerging from companies who are looking to build their in-house M&A core competencies is a need to start thinking about integration earlier in the process, to expand their assessment of the business beyond just the financial and legal aspects and address important risk areas such as culture and strategic fit. These need to start during due diligence!

Typically we are not buying companies to operate them on a stand-alone basis, but to combine them in some way that will create greater business value. This means that we need to assess the target company from a full business and value perspective: financially, organizationally, operationally, culturally and especially strategically. Additionally with the shorter time frames we often have between announcing the deal and taking legal ownership of the company we need to jump-start the integration planning during the diligence effort with a more thorough focus on assessing value drivers, integration risks and complexities, and potential synergies. As companies have elevated the scope of what needs to be accomplished during diligence and the overall implications that this has to achieving the end business objectives, they are turning more to the M&A Leadership Council to train their team on the new strategic due diligence model: business fit and value assessment.

These custom-designed strategic due diligence workshops, taught by the M&A experts within the Leadership Council, are focused on the education and training needs for your management team as well as the cross-functional teams involved.

While the agenda is modified to best meet the in-house training objectives, topics typically addressed in a facilitated session include:

Setting the Context for Strategic Due Diligence
Review of Due Diligence Fundamentals
Organizing and Structuring the Due Diligence
Acquisition Rationale and Target Selection (i.e. based upon likely acquisitions to be made or a specific, near-term transaction)
Scenario Planning: Business Fit and Value Assessment
Class Exercise: Determining Value, Risks and Synergies in the Deal
Due Diligence Preparation, Planning and Team Launch
Group Breakouts and Discussion: “Getting Ready”
Bridging to Integration
Summary and Next Steps

Clients that are, or plan to be, serial acquirers may have general training performed using case studies and class exercises representing likely scenarios of potential acquisitions. Other companies may request the M&A Leadership Council to conduct the workshop just-in-time to provide jump-start training and preparation for a specific transaction which may need a diligence launch within a week or so.