OK – I know I am being a little ambitious, given the current economic climate. Call me an optimistic fool, but I am going to have blind faith that the world economy will right itself. And that will mean back to business for everyone, including taking stock, licking wounds and looking ahead.
Once that happens, the first order of business will be growth, which can only be done two ways. The first is through organic means. This equates to hard-work and long term planning. The second is via business acquisitions – the short-cut into a market, a product/service offering or to expansion.
We have all heard the statistics. A high percentage of these corporate marriages aren’t successful. Of course, success depends on the definition you give it. But unhappiness, productivity downturn, exit of key players and the negative impact on business continuity must be part of that definition.
So how can you place yourself in the position to ensure that your corporate marriages will have the best chance of success? Through strategy and planning of course! And yes, I have a process that I recommend….
As a minimum, you should appoint members of a Deal Team. The task of this team is to drive the acquisition projects and to be responsible for its success. This team should include the key executive decision maker, someone who can be responsible for crunching the numbers, someone who understands the operational processes within your business and someone who can lead you through the legal and HR risks. Ideally, this should be the C-Suite (CEO, COO and CFO), as well as the Head of Legal, along with the business line head that this opportunity will be acquired for.
The first step of the process begins with the identification of an opportunity. The initial opportunity should be brought to the Deal Team to discuss its merits. If the Deal Team believes that further investigation is required then it must see to crystallizing the opportunity. This involves obtaining informal approval from Regional or Global senior executives, signing Confidentiality Agreements for those involved, commencing formal discussions with the target, running synergy workshops, obtaining valuation reports and drafting an initial business case based on the outcome of the information gathered.
After that, if the deal still looks like it could have wings then the commercial details should be secured. This will require a term sheet to be signed once the commercial terms are negotiated and approved by the requisite Regional or Global senior executives. Of course, there should be the usual out-clauses in the term sheet, for example where the due diligence brings something bad to the surface.
The next step is to crystallize the deal. This involves performing the necessary due diligence, preparing the due diligence report and to obtain formal approval from the Regional or Global senior executives to conclude the deal.
Now the pointy-end – finalising the deal. The transition plan should be developed and implemented. This is a crucial part of the acquisition process, and proper resources must be put in place to support this. Also, don’t underestimate the time required to properly transition a business into yours. After that comes the signing of the marriage certificate and the big day when you are husband and wife!
It is important to ensure that this process of identifying to finalising the deal is made known to all staff members to preserve continuity and confidentiality.
Now that you are married, don’t overlook any ongoing obligations. This includes any contractual deliverables like earn-outs and delayed transition-in or transition-out items. Also, ensure that you take the time to regularly review the impact of the transition on staff, on morale and on your merged business.
If you have all of the above in hand, then there’s a good chance that your marriage won’t end in divorce. After all, you don’t want to be known as the Britney Spears of the corporate world when it comes to corporate marriages, right?
Filed under: Strategy & Operations