The Acquirer’s Playbook: Determining Your Strategic Vision

Global mergers and acquisitions were at an all-time high in 2015, with $4.28 trillion worth of deals — 16.6 percent more than the previous peak in 2007 and about 30 percent more than 2014, according to a report by Mergermarket. M&A is a hot topic but the question remains, how successful will these deals turn out to be?

The Acquirer’s Playbook sets out a simple process map to build M&A capability into your business, what I call the Acquisitions Approvals Model. In this book excerpt, I’ll explain the essential first phase of getting acquisitions right: developing your strategy.

This first phase of the Acquisition Approvals Model is focused on defining who you are. What is your strategy? Acquisitions are a terrible idea if you’re unclear in which direction you want to travel.

Developing Your Strategic Direction

I can’t stress enough the importance of understanding who you are and what your core competencies are, because getting that wrong can be fatal. You need to be damn sure you can integrate the target and that you can run it better than the seller. Remember you are not just buying the house; you are buying the family inside it! Acquisitions are just a tool to enable the execution of your strategy. They are not a strategy on their own.

If you are embarking on an acquisition strategy for the first time and reviewing the best direction to take the business, then I’d recommend conducting a Strategic Workshop. This one to two-day event with your management team can help develop and validate your acquisition strategy.

These are the key ingredients to a successful outcome:

• Remind your senior management team why reviewing your strategy is crucial to success. Explain to them the importance of “zooming out” as well as “zooming in” (as Collins and Hansen discuss in their book, Great by Choice). Remind them of recent examples of large successful companies missing the bend in the road, e.g., Motorola, Nokia, Blackberry, Kodak, Oracle. Big companies get complacent, lazy, overconfident. They miss things. Taking time out to review strategy could be the key to your success.
• Remind them this is a great technique for reviewing the best way forward. To really rehearse potential market segments that you could dominate based on your unique skills. This is no easy task. There is still too much mystery interpreting the significance of market events. For example, banking, HR, healthcare, media, music, software, and automotive sectors have all been generating a plethora of signals to their respective players that repositioning is essential!
• Invite each participant to the workshop to produce an essential position paper to distribute in advance of the workshop. This builds great engagement to the debate and ensures issues are thoroughly researched. To allow thoughts in the workshop to flow smoothly, limit the agenda items to a maximum of three. Focus on three big key issues that will help drive the business forward.
• Appoint an external moderator.
• Hold the workshop offsite, and ban the use of cell phones during each session. Allocate the time efficiently to ensure the three agenda items are covered. All agenda items must end in clear next steps (which could be as simple as detailed research to establish the key facts). The minimum outcome for each agenda item should be a set of questions you need to answer, at some point, in the next four weeks.

Be careful that these workshops don’t become witch-hunts. It’s too easy for powerful managers to gang up on one weak manager. Control personal attacks by focusing on the business agenda. Typical outcomes to strategic workshops focused on acquisitions include:

• Restructuring of organization charts.
• Launching of a new acquisition direction focused on specific targets.
• Launching of new products.
• Aborting a losing idea.
• Total overhaul of the marketing content strategy.
• Revamping of the company’s business model.
• A much tighter definition of what business the company is in!

Aligning your acquisition strategy perfectly with your company’s mission has tremendous benefits:

• Your story becomes more compelling to your own employees.
• You can ensure head office buy-in (where relevant) to the strategic direction you have chosen. This will be important later when targets are presented to the board for sign-off.
• You will have a compelling story of why you want to buy them when you meet targets for the first time. Don’t underestimate the importance to an owner of non-price issues like what happens to their employees.
• You will have an authentic post-acquisition integration plan for each target to share with the company owner. It will sound like you’ve thought it through — because you have.

For more, read The Acquirer’s Playbook. Acquisitions can quantum leap growth, but they require a process map to ensure success. The Acquirer’s Playbook provides that process map, breaking down a complex transaction into actions you can execute. 

The Acquisition Approvals Model is a detailed process map which you can embed in your business. It will force your post-acquisition integration plan to the top of the agenda. It will significantly change the odds of successfully completing the right deals at the right price and integrating the targets seamlessly.

About the Author

Ian D. Smith, B.A., C.A.

Ian founded The Portfolio Partnership (TPP) in 2009 to assist clients build M&A capability into their business. The practice builds its Playbook into public and private companies, to ensure only the right targets are acquired at the right price and integrated seamlessly.

Prior to TPP, Ian’s experience included building businesses in publishing, investment banking, and software in both Europe and the United States, giving him a unique set of skills and a sense of humor. As an ex-CFO, investment banker, venture capitalist, and CEO, Ian has completed over 40 M&A transactions, realizing more than $400 million for shareholders over the past 25 years.

Ian has been creating remarkable businesses since the early 80s with Thomson (now ThomsonReuters), creating Livingstone Guarantee, an early leading investment banking boutique, as the second employee, building the FTSE 100 Capita Group in the 1990s, and turning around software businesses in Boston over the last decade.

Ian’s hobbies include writing and running. He has published seven books and around 500 blog posts. The Smith Report Blog is widely read within the business community. Still a competitive soul, he competes on the track for Mass Velocity and in 2016 he ranked #6 in the world at 400m indoors in his M55 age class. Ian is also a member of the M55, 4x200m team that holds the American record. He graduated from the University of Strathclyde and is a member of the Institute of Chartered Accountants of Scotland. Ian holds both US and UK citizenship.

Contact details: [email protected], Office: 978 395 1155.

Web Site: www.portfoliopartnership.com