Acquisitions have become a key method for companies to grow and transform. Therefore, it is no wonder that there is a huge pressure on M&A to take a quantum leap into becoming a mature, continuously improving process, producing consistent results.
While there often is a small, dedicated M&A team, at least in large corporations, most of the people are only temporarily assigned to M&A projects. They might be functional managers who are not familiar with M&A work or they might be external advisors who are not that familiar with the buyer’s business. Therefore, they are able to evaluate acquisition targets on a quite superficial level only. After their assignment is over they leave and walk away with all the knowledge they have accumulated and the same knowhow has to be created again for the next project.
The consequence is that lead deals have to spend an enormous effort just to guide the newly assembled team through the process, rather than focusing on deal-specific objectives or continuously improving and accumulating their knowledge. In addition, the same mistakes are made repeatedly, and expensive external advisors have to be used to foster an adequate skill level in the team rather than using their time on giving truly value-added advice.
So, how do you accumulate knowhow and get the most out of your staff in a function that most people just temporarily visit, where they are working in different locations in different time zones and which they view as a temporary assignment?
A brief analysis usually reveals the following very basic shortcomings in M&A process management practices; That there is no systematic approach that is continuously being improved and that includes processes to prevent costly mistakes, and there is no centralized source of reference, but a lot of information sharing that relies on phone conversations, emails, hallway conversations, and insecurely shared files. Best practice playbooks and checklists do not translate into reality.
Digital M&A enables a new way of working
Like so many other things, M&A is also being reinvented as the internet and software enable new ways of working, and one of the key players leading this field is Midaxo, trailblazing a whole new niche of players that are now focused on cloud-based software for M&A and corporate development. These new software suites provide end-to-end solutions for M&A. They can be used to accumulate process best practices, centralize all M&A information, guide projects from start to finish, generate reports, and facilitate collaboration. Digital M&A is an umbrella term for the new way of working, combining people and processes with a modern technology platform.
Jay Plueger, VP of Strategic Initiatives at AvidXhange shares his experience on using the Midaxo platform, “Not having multiple spreadsheets throughout the company has let us become more efficient in tracking M&A activity and strategic partnerships, and allows us to share that information across multiple departments. One of the key things has been that it allows us to create a reusable playbook that we can use for each new acquisition target as well as each new integration.”
Smoother management structure
As information becomes centralized, management becomes easier. These platforms can also capture experience from the changing M&A teams and deal advisors, which can be used to systematize the process, help make better judgments on acquisitions, and save time reinventing the wheel every time. Companies have for a long time tried to use due diligence (DD) checklists and M&A playbooks to provide a standard for the acquisition process, but how has this worked in practice? Not well. Usually these are heavy to read documents, which collect dust and are understood well only by the in-house M&A expert or the consultants who wrote them. They also do not accumulate knowledge that well. When did you last update your checklists or playbook?
Luckily, a modern M&A platform can transform static playbooks into interactive project plans, which can be easily customized to meet the needs of individual projects. Compared to Excel sheets with hundreds of checks or process playbooks with hundreds of pages, these provide a visual presentation of the phases, key deliverables, functional streams, and individual tasks. Rather than overloading team members with information, these platforms enable a drill-down to more detailed guidance as needed. Best practices, document templates as well as any deal documents are easily on hand when needed.
Precise instructions make teams more productive and reduce hassle
So, how does this look to a team member working on an acquisition? For them, the acquisition process is clearly presented along with task assignments, guidance, and access to the relevant documents. Instead of getting instructions like “go and do the legal DD and pay extra attention to IPR protection in this case,” team members receive very sophisticated instructions regarding what they should pay attention to and why.
This makes a team member’s life easier as they understand the big picture and what is expected from them. More time can be spent on reviewing material and producing analysis rather than figuring out what to do. Team members can also record any findings and observations right in the system as well as simply marking tasks as done when the questions are completed, rather than writing long reports.
For the project manager, the system can provide real-time reports of what has been done, what is still to be done, what has been learned, and what analysis has been produced. The system can also automate some basic project management tasks like sending task reminders and follow-ups. According to surveys, a significant part of premium-priced external consulting is actually spent on routine admin, coordination, and reporting on tasks done by the consulting company’s junior staff.
Reverse VDR gaining ground
Typically, a seller provides a data room, and the buyer’s team can browse it to find the answers to their DD questions. However, an increasing number of companies have turned this around, and the buyer’s questions and information requests are defined on their own platform and they can invite sellers to provide answers and submit material.
This significantly reduces the workload for the buyer’s team and provides them with material that is more relevant to work with. It is often much easier for the seller to produce material to order than for the seller to interpret existing material designed for other purposes. The typical jigsaw of multiple separate tools for document sharing, communication, project coordination, etc. is replaced with a single integrated solution.
The buyer’s team can then review the material and flag their findings and additional requests to the seller faster, accelerating the overall DD process. The buyer naturally has full control of what information and which findings are made visible to the seller and what is kept within the team.
Quantum leap in M&A productivity
An M&A platform significantly improves efficiency by making new team members productive much faster with less training and more focus on the case specifics. Team members enjoy greater freedom to work more independently, with less hand-holding, and they still provide a consistently high standard of work.
Directors can scale teams with confidence, use new resources in the team, engage in deals that are more complex, and automate much of the basic project management follow-up work. They also do not have to pay for consultants to reinvent the wheel every time there is a new project, but can use them for more strategic and higher value-added advice.
Inviting the target to provide information and collaborate on the same platform brings the buyer’s and seller’s teams closer and it significantly reduces the load of the buy-side team.
Furthermore, having a process that is being continuously improved ensures that the company accumulates organizational M&A capabilities even if the individuals change. This is key because M&A teams start learning from past cases and do not repeat the same mistakes. Over time, this organizational knowledge will translate into a real competitive advantage.
Who is Kalle Kilpi?
Kalle leads product design at Midaxo and is interested in ways of making M&A more efficient and successful. He studied management and information systems science and has had the opportunity to work with top-tier clients. At Midaxo, he works hard to link cutting-edge M&A processes with the latest enabling technologies.