Picking the right guys for an M&A
Once you find the the right strategy & define what matters most to you, comes the most intense part of an M&A. Selection.
At this stage, some targets may already be in mind that could potentially be a great fit for the strategy selected. Advice from a professional: Don’t skip the next few steps.
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#1 Set up a strong target evaluation & compatibility scorecard, based on what is important to you as an organization
A scorecard allows for looking at things more objectively, allowing for a scan of a larger base of potential targets. This is custom created with the management views of the objective.
This is the most important step in the process. This establishes the attributes of a business and outlines what you are comfortable to overlook and what is essential in a suitor. Without this ‘target profile’ well laid out, there are bound to be issues in getting a strong business integration roadmap.
A sample scorecard could look something like this
You can access our template for this simple scorecard here if you are planning to make one for yourself: [ Download ]
Golden Rule: Exceptions are tolerated but are not be the norm. If there are too many exceptions, start from setting up the right M&A strategy again.
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#2 Identify potential good fits
While it is true that on paper, M&As boost shareholder value (especially in the bourses), it is also true that many M&As fail. Over 50% of these failures can be attributed to the strategy adopted and the process utilized for Target Identification & Selection.
This process can be broken down into 3 steps:
- Scanning – scan the market the targets occupy across the geographies they operate in
- Prioritization – prioritize the targets for selection based on the evaluation criteria and value accretion logic
- Elimination – eliminate the ones who do not qualify for further assessment
Once you have been able to identify these targets, the next step it a deep-dive into knowing them.
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#3 Create detailed target profiles that are a combination of market information and public access knowledge
One of the most critical aspects to consider is that the industry is large but doing a thorough job allows for you to be able to run through multiple targets judiciously, eliminate bias and avoid false negatives or false positives. This profile should be a mix of both qualitative and quantitative indicators.
You can download a detailed target definition template here: [ Download ]
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These steps and free downloadable tools should help you navigate the waters and ease the process of elimination.
Do feel free to leave me feedback and let me know if it helped you.
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About me:
A passionate relationships guy in the financial advisory industry from the BFSI industry.
Currently working with Prequate, a management^finance advisory company in the Investment Banking, Mergers & Acquisitions vertical and heading engagement. Been a part of teams from startups and large multinational banks.
You could read an expanded version on Prequate's blog: [ Simplifying M&A, strategies & practices ]
More about Prequate? [ Website ] or [ Book my time for a chat ]