The Importance of the M&A Playbook

In today’s over-capitalized and fast-paced deal environment, buyers are anxious to quickly identify the best targets and put their capital to work in the most effective manner possible.

The competition to acquire targets is fierce, resulting in a market of multiple bidders and increasing valuations and for M&A teams, this has led to an environment where deal makers must get results and must get those results faster than ever.?

It is not uncommon to hear the question: “Can you get this done in 10 days?”.

In addition to the mounting pressure to turn in fast, actionable results and ideal integrations, deal teams are pressed to build a deeper understanding of the customer and the economics of the target organization, such as the cost of acquiring and retaining customers, into their financial models.? The complexity of the process is increasing, in addition to the pressure of reduced time constraints.

At the same time, there is the challenge of creating and maintaining standard operating procedures that meet both corporate governance standards and expected outcomes.

There are several sophisticated tools, mostly focusing on the due diligence phase, that have been available to sellers for a long time.

However, it’s becoming more necessary for deal makers, in particular buyers, to focus on areas before and after the due diligence period, as they look for ways to capitalize on market momentum and seek the highest possible valuation and best partners.?

So, technology is having a multifaceted impact on the M&A industry. On one hand, as technology platforms have evolved, this has to some extent equalized deal dynamics by making critical

information more accessible to more people.

In other ways, it is forcing deal teams to rethink their traditional notion of how they define targets, plan and execute integration, as well as how they build their teams.?

M&A industry experts insist it’s vital to ensure that deal teams stay focused and do not get swayed by the heat of the market.? To ensure this happens, deals teams need to create, follow and maintain specific playbooks for the various transaction types they intend to pursue.

The unfortunate reality is that many organizations either do not have a playbook they follow, have an outdated model or, in the worst case, lose the learning through the departure of key employees.

In a study, one expert noted: “The valuation is the business plan, so you need to adhere to a playbook if you’re going to get it right. A big part of the challenge for firms that aren’t seeing the returns they forecast is that they’re not following their playbook”.

So what is an M&A Playbook?

An M&A playbook is a published set of best practices that guides your organization through the complexity of the M&A processes to execute a successful transaction. It includes a set of tools, templates and processes applicable to activities ranging from initial strategy to integration planning to long-term value capture.

In addition to providing a road map, it also helps keep everyone involved on the same page. Every transaction involves a wide array of stakeholders.?

The playbook, therefore, is an important tool for setting and managing expectations across that group of stakeholders – ensuring that everyone understands the deliverables for which each team is responsible.?

For example, some large organizations may have upwards of 50 different project managers working on integration, so a mechanism that creates consistency and a common understanding of processes and purpose is essential.

Lastly, the playbook should also incorporate lessons learned – and particularly the “hard” lessons – from previous transactions. As such, it becomes a living document that your organization updates after each transaction. The best practice is to update the playbook after every transaction.? It should include not only the things that worked but also the ‘gotchas’, so teams are better prepared for the next deal.

While the M&A playbook is not a magic spell, it is an especially valuable resource for organizing the process to achieve the deal’s goals.

As part of the playbook, a well-thought-out post-merger integration plan is critical to avoid the risk of paying a high price and failing to realize all the potential deal synergies.?

The M&A industry still grapples with a relatively high M&A failure rate post-transaction attributed to errors in the post-merger integration process and it’s an aspect of the playbook that should be addressed early in the process, not post-transaction.

Today’s M&A environment is complex, and fast-paced and requires a broader set of expertise from deal advisors, buyers and sellers to excel.? Deal professionals understand more than ever, the need to augment their operations with new technologies that give them a competitive edge.

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