The Acquirer’s Playbook was recently published on Amazon. It sets out a simple little process map to build M&A capability into your business – The Acquisitions Approvals Model. Using extracts from the book I explain the essential first phase of getting acquisitions right – the strategy piece.
Phase 1 – Develop Strategy
This first phase of the Acquisition Approvals Model is focused on defining who you are. What is your strategy? Remember strategy is what you leave out. Acquisitions are a terrible idea if you’re unclear in which direction you want to travel.
Stage 1 – Develop Strategic Direction
I can’t stress enough the importance of understanding who you are, 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! You want to buy what you want to buy, not what is up for sale. 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.
The away day, the retreat, the jamboree. They have all been discredited by abuse. But there is a really powerful, one to two-day event that I would recommend to a management team in the process of validating their acquisition strategy – The Strategic Workshop.
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” (Collins and Hansen). 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, e.g., 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. But they must be 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 4 weeks.
You have to 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.
- Head Office (where relevant) buy-in to the strategic direction you have chosen. This will be important later when targets are presented to the Board for sign-off.
- When you meet targets for the first time, you need to have a compelling story of why you want to buy them. Don’t underestimate the importance to an owner of non-price issues like what happens to their employees.
- Being clear on who you are and what you want to become is critical to setting a post-acquisition integration plan for each target. The integration plan will have authenticity. It will sound like you’ve thought it through because you have.
The Acquirer’s Playbook can be purchased here. I run workshops to explain our process map – The Acquisition Approvals Model and our practice specializes in building M&A capability into your business.
These workshops are a great way to test your own process, implement a new one or tweak parts of an existing process that’s not working. Reach me at Ian@TPPBoston.com.