Does Your Organization Have the Knowledge, Experience and Tools for Speed, Synergies and Stability?
by Jim Jeffries, Chairman, M&A Leadership Council
The model below, provided by M&A Partners (one of the professional services companies in the M&A Leadership Council), is a great way to graphically display the overarching requirements for successful M&A Integration. This is one of the models we provide to our attendees at our events and I believe it should be considered by everyone in M&A for its simplicity and completeness. If I were embarking to grow my company by acquisitions for the first time, or if I wanted to make improvements to my company’s practices, I would learn this model and be sure to comply with every element. Let’s take a look from the inside out:
RESULTS – Obviously getting the results we announce to our stakeholders is the primary objective, but on the flip side, we surely want better results than have been achieved historically. The top consulting firms will report that more than 70% of M&A deals don’t deliver on their promises. Over half don’t achieve the cost of capital.
S3 (Speed, Synergies, Stability) – S3 for most deals will define the results.
SPEED is the pace with which things get launched and completed. Historically, the best integrations are done rapidly, decisions are made swiftly and the integration is completed quickly. Speed is often considered counterintuitive and countercultural to normal business tenets. This is why so many deals miss the mark. Without speed, most synergies will evaporate.
SYNERGIES must be achieved quickly and thoroughly, and executed in such a way that they are lasting. Synergies are present in every deal and very often they are the primary driver for the deal. In my mind, they come in three flavors (cost, revenue and performance).
- STABILITY is maybe the most critical of the three S’s. Yet, most often the passion of the deal causes a company to sacrifice the ongoing business in favor of a focus on the new addition. Before you do anything else when pursuing an acquisition, please create the strategy for stabilizing all stakeholders so as not to erode the value of your core business as you integrate the new one. While we are achieving synergies at a rapid pace, it is critical that we stabilize our talent, customers, vendors and all other stakeholders during this very vulnerable period.
Now, Speed and Stability are connected by Training because you won’t have either unless you first know what you are trying to achieve and how to achieve it. Training is the job of the M&A Leadership Council. You will not master the art and science of M&A just by being good at your day job. Speed and Synergies are connected by detailed Planning. The more detailed the plans, as far in advance of close as possible, the more probable the rapid and thorough achievement of Synergies and overall value creation. Synergies and Speed are all about the Execution of the detailed plans by well-trained people.
The three outer sections of the S3 Model are the enablers and will hold the rest together - Knowledge, Experience and the Toolkit. Another way of saying it might be, “The Science, the Art and the Tools of M&A”. Without the knowledge (science) of what to do or how to do it, the artist cannot create something that will be highly valued by others. However, knowledge alone does not make one an artist. All good and successful art requires experience, and experience will enable value creation once you put the right tools in the hands of the artist.
One gains knowledge through training. Then comes experience. And, today’s tools for transparency and oversight, document warehousing, workflow and information tracking are extraordinary.
The S3 Model…. Does your organization have the knowledge, experience and tools for Speed, Synergies and Stability? In next month’s issue of the M&A Monthly, I will delve deeper into each of the components discussed today.