For most technology and services companies, acquisitions are an important part of their growth strategy. However, corporate M&A is often an inefficient, reactive process with limited resources and infrastructure. With a dramatic increase in M&A activity and the growing footprint of large private equity funds, the “War for Acquisitions” is increasing in its intensity. Wall Street continues to ratchet up growth expectations for successful companies, and M&A is one of the most effective ways to show growth in revenue and earnings in a short period of time. M&A deals can be incredibly impactful in today’s environment where innovation and time-to-market timelines are compressed. The companies that continue to view their acquisition programs passively are at a distinct disadvantage to their competitors and the often-nimbler private equity buyers. The War for Acquisitions is on – it’s time to get proactive.
We are challenging the traditional corporate development methodology and are looking for more creative methods of finding growth through M&A. A natural place to begin is with what we call the M&A Brand.
Product brands have been around for hundreds of years. Companies spend billions of dollars annually proactively defining their product brands. More recently, companies have turned their attention to proactively defining their employment brands in an effort to win the war for talent in today’s low unemployment environment for skilled workers. For M&A, the same rules apply. M&A Branding is a targeted, long-term strategy to manage the awareness and perceptions of potential acquisition targets, channel partners, intermediaries and related elements of a company’s ecosystem. Establishing an M&A Brand is critically important for companies to succeed in the War for Acquisitions.
The challenge is real and the stakes are rising. How many acquisitions have your competitors announced that caught you by surprise? How many times have private equity firms poached what should have been an accretive acquisition for your company with clear synergies? Why are deals happening with companies you didn’t know were for sale?
At the same time, M&A has become much more competitive in an increasingly efficient marketplace. Long gone are the days of “hidden gems” in the market. With the incredible reach of the Internet, it is easier than ever to identify the players in a market and gather information on businesses. New players, such as private equity firms, have entered the market with a proactive approach to M&A. They have legions of freshly minted MBAs calling into all your acquisition targets to gather information on the companies and the competitive landscape. Recently, with the strength of the debt markets, we have experienced several examples of private equity firms outbidding strategic acquirers in an auction process – something that was exceedingly rare just five years ago.
What does this all mean for the C-suite of leadership? As competition for acquisitions intensifies, becoming the “Acquirer of Choice” in your market segment is a strategic imperative. The boldest acquirers have proactively defined and promoted their M&A Brands, an area that for many others has been under-invested for years.
What is an M&A Brand?
The M&A Brand is an identity at the center of both internal and external forces. It is a blending of the corporate brand with the corporate development track record, both real and perceived from an external perspective where other deals impact sellers' perceptions. Graphically, the M&A Brand is at the center of a collection of influences as perceived by the marketplace, often with imperfect information most often caused by a company’s lack of attention.
Consider the graphic below:
Perhaps a better way to define what we mean by M&A Brand is to outline steps to take in establishing it. Based upon leading practices we’ve observed, we’ve identified the following five straight-forward steps you can take to move your M&A Brand forward.
Five Ways to Establish Your M&A Brand
1. Define Your M&A Brand. Like any other brand, the first step in creating a brand is defining it. How do you want to be perceived as an acquirer? Is it consistent with your company’s corporate brand and employment brand? Enlist the help of your marketing department to take you through a branding exercise. It will be worth your time.
2. Create A Corporate Development Landing Page. Once you define your M&A Brand internally, broadcast your story. Almost every corporate website has a landing page for careers -- shouldn’t M&A follow suit? Provide information to interested parties about past acquisitions (such as FAQs for employees, customers and partners) and share success stories of employees that have risen through the ranks post acquisition. Make your company an attractive landing place for those who want to sell their companies. Private equity firms are way ahead on this front.
3. Tell The World What You Want. While most companies do not want to publish their M&A criteria, it is helpful to provide some guidance to the target audience to help proactively develop your pipeline of candidates. Of course, the more detailed the information the better, but even broad guidance can provide encouragement to acquisition candidates to submit some information for review. Again, the corporate development departments lag far behind private equity firms' communication efforts.
4. Make Your Corporate Development Team Accessible. One of the biggest complaints we hear from acquisition candidates is that it is difficult to navigate large acquirers' organizations. In most organizations, it is very difficult to find the right person to engage in an M&A discussion. Even when you find that person, he or she is often nearly impossible to access. This is often a mindset challenge. The corporate buyers seek to limit their attention to only those acquisition targets that will “move the needle” in terms of financial contribution. The result can be a myopic loss of innovating opportunities.
5. Celebrate Your Successes. Too often we find that once a deal is completed, the natural momentum that is created becomes diluted too quickly and acquirers fail to make the most of the event. The leading acquirers make it easy for all stakeholders to appreciate the rationale for the transaction and the accretive benefits, while addressing any potential stakeholder concerns. The leading acquirers provide website collateral for customers, employees, shareholders and others through much more than the conventional press release and invest in presentations and exhibits that explain the benefits of the transaction. Certainly some competitive restraint is applied, however, so what is communicated implies high confidence and forward motion.
A Strong M&A Brand Supports The Win
M&A Branding is a solution to the challenging forces facing companies that are looking for growth and innovation through acquisitions. Because its very nature is outward facing, M&A Brand building helps to continuously challenge the organization’s thinking in new and enlightening ways. The M&A Brand is an extension of corporate branding efforts and helps to magnify the company’s presence in its ecosystem from customers to competitors. If properly resourced and prioritized, a strong M&A Brand, when combined with a disciplined and well organized corporate development process, will put you in the pole position for any quality acquisition candidate. It is a great place to be when the next game-changing opportunity comes along.
Furthermore, if you let your competitors define your M&A Brand, they will not be kind. Enlist the help of your marketing department and build an M&A Branding strategy. Be proactive. Tell the world why your company is a perfect landing spot for smart, innovative entrepreneurs and their employees and customers. It will save you a lot of time and effort later, and may be the difference between “Congratulations!” and “How did we miss that deal?”
DISCLAIMER This presentation is intended for information and discussion purposes only and does not constitute legal or professional investment advice. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of Harbor View Advisors, LLC (“HVA”). The information in this presentation was compiled from sources believed to be reliable for informational purposes only. HVA does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented.