Doing the Right Deals

Abstract

Executing a merger and acquisition (M&A) deal in today's economy, with tighter credit markets and increasing concerns about the impact of the subprime lending crisis, requires an effective strategy that will ensure you do the right deal at the right price. The authors reveal what makes a successful deal strategy today. © 2008 Wiley Periodicals, Inc. information and to leverage the deal stakeholders' collective knowledge. It should also allow all parties involved in the deal to collaborate and share information on a real-time basis in a way that was not possible a few years ago.All too often, deal making is done in a secretive "art-like" process where information is held tightly by a small group of carefully selected deal insiders. This is often done for some very obvious and good reasons, but it naturally tilts the environment away from transparency. Unfortunately, the deal world is usually done in an environment where perfect information is rarely available and not sharing information can be limiting and costly.Too often, a market development or due diligence finding is known by part of the deal team but is not shared with the other members. This lack of communication can cause the deal to derail because the information is not widely known and, therefore, not considered in the process. For example, the compliance or legal team may discover information about some questionable conduct of a key agent of the target company. If this information is not shared with the commercial or financial team, they may not consider it in their models. Consequently, the tax team may not properly assess the negative tax consequences of these actions. Committed PeopleEvery deal needs a champion, who is responsible for all deal activities. This champion needs to be supported by committed people in every functional area. Without exception, worldclass acquirers have centralized acquisition teams that report directly to the chief executive and have the ability to exercise peer-level influence over the various business units, infrastructure services, and corporate development. This structure helps break down the silo mentality, encourages collaboration, Doing the Right DealsExhibit 1and enhances a company's chance for success. The team is usually headed by a business unit leader and should include a dedicated integration specialist. This is important because underestimating the integration issues and complexity will often result in an unsupportable valuation model and protracted transition process. Outside experts are often included to supplement internal resources. All acquisition team members should fully understand and follow the firm's standardized process for managing transactions.As cliché as it sounds, all teams are only as good as their leaders. The need to have a clear leader who has the ability to execute the leadership role and the stature in the organization to overcome difficult obstacles is essential. Deals often fail because companies do not put enough "talent" in the leadership roles and/or the leaders do not have the ...