July 5, 2017
In a fast-changing environment, mergers and acquisitions are a strategic tool that allows companies to respond to customer demands. Today’s customers often want companies to serve as “aggregators”—of technologies, services, resources, and more—and the M&A playbook provides a way to meet this market need, according to David Braun, CEO of Capstone Strategic, Inc., an M&A advisory firm that helps companies design and implement strategic growth programs.
Braun talked about the use of M&A structures—such as acquisitions, joint ventures, strategic alliances, minority investments, and majority investments—in a podcast interview with AMA Edgewise. He expects to see more of these partnerships as companies seek out the best way to serve customers.
“In this environment, where the world is changing very fast, customers are demanding more of what I call aggregation,” he said. “They want to be able to go to someone and get more services, capabilities, technologies, whatever the case may be. How do you provide that? In many cases, you may not be able to do it all yourself.”
As companies look to create the right “basket of relationships,” said Braun, they may task middle managers with helping to identify strategic partnerships. He offers these tips on the process:
Explore the “why” of a potential deal. Before managers focus on the deal itself, they need to give sufficient thought to the “grounding questions” behind potential investments, such as acquisitions. People who are moving up in management should think about “how they can help answer that question—Why? Why would we ever be interested in an acquisition? What can we get out of an acquisition that we can’t get otherwise?” said Braun, the author of Successful Acquisitions: A Proven Plan for Strategic Growth (AMACOM, 2013).
Take time to identify the best candidates. The world of M&A has been demystified, and middle managers are taking part in the process. They may be asked to consider what their company should be doing in terms of partnerships and which firms it should be partnering with. Management may ask them to “help us find these folks, and then help us actually think about what would be a good relationship,” Braun said.
The problem: Due to time pressures and a desire to move quickly, managers may focus on the more obvious prospects that are already on their radar screen or are currently available for sale. But in Braun’s experience, M&As don’t fail because the valuation or the legal paperwork wasn’t quite right—they fail because the company chose the wrong partner from the start.
To avoid this scenario, managers need to slow down and give thought to identifying the best potential partners—perhaps companies that are not on your radar screen or are not for sale. “It’s really about being thoughtful and intentional about the companies you are partnering with,” Braun said.
For more information on M&As, listen to the Edgewise podcast with David Braun.