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CEOs

5 Tips to Build a Successful Corporate Development Program

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reidValfer
Reid Valfer

For companies looking to grow through acquisition, establishing a corporate development function is a logical first step. We talked to Reid Valfer, SVP of Corporate Development at Rise Interactive, for his insight on building a successful corp dev program.

Whether you’re planning to bring a full time corporate development professional, or involve your CFO or others on a part-time basis, here are a few tips.

1. Hire someone who knows your business — or is poised to learn quickly.

Valfer says that one of the most important skills he brought to his current role was “an understanding of the core businesses at Rise. Prior to my role in corporate development, I spent five years managing different aspects of the business. This provided a clear understanding of how Rise’s different teams function and flourish, and enabled me to identify areas where we can expand our services.”

Of course, promoting or moving someone from another part of your company is not always possible or necessary. But outsiders coming in should be prepared to spend a solid chunk of time becoming familiar with the organization’s pain points, success stories, and plans for growth. If you’re planning to bring on a corp dev hire, consider someone who has worked in similar companies (perhaps even a competitor) and can easily hit the ground running thanks to prior industry knowledge.

2. Start with the pipeline.

Upon moving into corporate development, Valfer immediately began working “to establish a pipeline for potential acquisitions that appropriately complemented our capabilities and aligned to our 2016 and 2017 strategic and operational planning.” He prioritized conversations with investment bankers, whom he connected with through Axial and other channels, and spoke with PE firms “to help them understand what Rise is and what we do.” In addition to establishing an acquisition pipeline, says Valfer, “I wanted to make sure that we were prepared if we needed to go out to the capital markets.”

3. Honesty is the best policy.

For Valfer, the most important corp dev strategy is simple to grasp: honesty. “I really want to be forthright with everyone I encounter to make sure that I am being as efficient with my time as possible and respectful of the relationship.” This is particularly important when leveraging long-standing relationships. “Many of the companies I am speaking to have either been a partner to us in the past or can be in the future, so transparency and trust have been key.”

Valfer suggests asking questions upfront “to ensure alignment and avoid potential misunderstandings or difficulties down the road. This includes talking with company founders about their visions and priorities and really making sure that they are a good strategic and cultural fit for Rise.” He also suggests asking broader questions around their skillsets, professional interests, and even personal hobbies.

4. Build the infrastructure first.

Not sure if it’s time to bring on a FT corporate development professional? First, Valfer says, “ensure that you have the proper infrastructure to merge companies into your existing business. Assess your internal team’s bandwidth in each of the different areas where a potential acquisition would affect them. This can help to determine if you need to hire in specific areas, as opposed to investing in corporate development.” Valfer also suggests “creating a reporting infrastructure with the finance team to easily allow you to measure the financial success of bringing on a potential company.”

5. Get to yes (or no) quickly.

As a company gets further down the line on potential acquisitions, Valfer’s biggest advice is to “get to a ‘yes’ or ‘no’” as quickly as possible. “You will be presented with a large number of opportunities and need to have honest conversations with the individuals involved around whether being acquired is something they are serious about. I would also make sure that you stay focused on the types of businesses and skills you are looking to acquire, and clearly understand how those fit in with your company’s own strategic plan.”

Valfer says it’s important to “move with a strong sense of urgency”; however, there are times when delays are inevitable. “We are cognizant of the owner trying to run his or her business while also taking the time to educate us on the business. I’ve found that the most common cause of delays is financial reporting — often companies have not made the types of investments that allow easy access to financial information.”

Another possible hiccup comes when a company may seem attractive — but isn’t strictly within the types of businesses the company is looking to acquire. “I think this happens every day!” says Reid. “It’s why you need to establish a reliable scoring system that can help take the emotion out of the decision.”

 

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