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Corporate Growth & Economic Development
Insights
Successful Mergers and Acquisitions
PART 1. How to sell your business in 15 not so easy steps
1. It is not about the transaction, it is all about the strategy. At Geo Strategy Partners we do not do a large volume of mergers and acquisitions. Primarily, this is because our practice focuses on strategy and strategic growth. Mergers and acquisitions are only one tactic to achieve strategic growth or strategic positioning. Perhaps the fact that we approach M&A projects from a strategic rather than transactional point of view accounts for our 100% success rate in the sale of privately-owned businesses.
There are many types of corporate advisors and advisory firms that can facilitate mergers and acquisitions: business brokers, consulting intermediaries, accounting firms, securities firms, investment bankers, consulting firms, and others. In general, these firms can be divided into two categories:
- intermediary/brokerage type firms focused exclusively on M&A but working on many “deals” at one time and playing the law of averages that one out of 3 or 5 will close; and
- firms that have other core competencies (such as accounting or finance or law) that perform this service even though it is outside their scope of expertise.
Geo Strategy Partners focuses on strategy, strategic growth, and strategic positioning. We believe that mergers and acquisitions are a tactical tool that should be part of an overarching strategic goal. That goal may be an exit strategy for a founder or a succession plan for minority shareholders. It may be a way to achieve faster growth or secure a strategic position in the market. The underlying strategic intent should be the focus, not the transaction.
When a Karate black belt slices a block of wood, he is thinking not about the impact of his hand and the wood, or even breaking the wood. Instead, he is focused on thrusting his hand beyond the point of impact. Mergers, acquisitions, sales, and divestitures should be viewed the same way. The focus should be on what the business will look like six months or two years beyond the transaction, not on the transaction itself. A recent client prepared a 120 page integration plan at the time they issued an LOI to purchase an acquisition target. That’s putting business planning first.
As this example illustrates, focusing on the strategy does not just mean identifying so-called “synergies” that seem so theoretically apparent with a superficial view of the two companies. It means looking deep into business models, organizational planning, business planning, marketing plans, and cultures and planning – not just envisioning – where the business will be in six months, two years, and five years after the transaction. When you focus on strategy and both parties to the transaction have thought through the business planning, the transaction becomes almost a footnote. Ironically, the result is a high-success rate in transactions as well as the ensuing integration.