Deal Types and Integration Playbooks
While it is true that every deal is different, most deals have some similar characteristics and can be classified in “styles” of one form or another. Likewise, most acquirers have a “corporate style” that permeates their organization as it relates to merger and acquisition (M&A) activity. Successful dealmakers recognize those deal types and styles and optimize key activities to create repeatable playbooks for deals and integration efforts.
A March 2011 Harvard Business Review article titled “The Big Idea: The New M&A Playbook” argued that deals can be classified in one of two major styles:
1. Leverage My Business Model (LBM) deals emphasize adding scale and resources from other companies to decrease costs, penetrate new markets, or rapidly scale existing businesses and products.
2. Reinvent My Business Model (RBM) deals add new products or provide step-change opportunities to shift the business strategically in the pursuit of new products, performance, or markets.
For LBM deals, speed to market and the ability to quickly execute integration activities are critical. For RBM deals, a carefully considered evaluation of strengths and weaknesses may be required, as the optimized end state is less defined from the outset. Building on deal style, corporate acquisition styles vary greatly. LBM acquirers may be more directive and have a stronger tendency to impose their styles on acquired entities, as the value drivers may seem clearer. RBM acquirers are counting on a significant shift to their capabilities, and may be more considerate of building a whole that is greater than the sum of its parts.
Organizations must honestly and accurately determine deal types in order to develop template playbooks for successful integrations. There is seldom one playbook that works for all situations, and best-practice companies develop sets of integration playbooks that are tailored to styles and cultures. Smart companies recognize that playbooks cannot anticipate all details and, therefore, will always require customization once the specifics of a deal become known. Integration templates are effectively “cookbooks” that must be flavored and matched to the unique needs of a particular corporate “meal.”
Having a specific plan for each effort is essential. Without a plan, organizations run the risk of unmanaged growth where new deals are piled on unfinished integration efforts, resulting in inefficiency. Little’s Law describes this phenomenon more generally as the tendency to multitask, initiate concurrent projects, complete only a few, juggle many balls in the air, lengthen delivery cycles, and ultimately reduce overall productivity. To achieve optimal performance, organizations must avoid this tendency by employing one crucial tool—a plan. In addition to laying out critical steps, a plan can help to identify key success factors, establish success metrics, and build engagement.
Another tendency is to reuse previous playbooks for future deals. Like copying a spreadsheet, over time, this practice can replicate bad habits and failed approaches. By taking an honest look at lessons learned coming out of each deal—and using that input to update the playbooks based on real-world experience—companies can refresh playbooks to emphasize strengths and address weaknesses. Playbook refresh is a continuous process.
Patrick Leonard serves as Managing Director at MorganFranklin and is responsible for leading the Financial Management and Performance Improvement practice. He delivers integrated solutions to global enterprises based upon expertise in business and IT strategy, enterprise transformation efforts, process improvement, accounting policies and procedures, and systems architecture and integration. Leonard is responsible for shaping the strategic direction of the company’s capabilities, as well as developing service offerings and business development, methodology development, client delivery, and quality assurance programs. Learn more at www.morganfranklin.com.
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