Think Small to Win Big!
First-time deals of any size can seem intimidating.
As the CEO you want to ensure success so you can get the thing you want: future growth.
Most business leaders think they need to start with a big deal to get a bigger value and ultimately a bigger payoff.
The opposite is actually true.
Now we’re aware this isn’t the typical view of bankers and investors, but my experience indicates that stringing together a series of smaller deals and melding them together to create a unit whose growth potential is bigger than the sum of its parts can be more successful.
Like a "string of pearls" approach.
The amount of work and costs associated with any merger is similar.
That’s why most people argue that to make the effort worthwhile it’s more profitable to consider only the bigger deals with the perceived bigger impact.
In reality, a bigger deal has a greater risk of value destruction which tends to offset the potential gains.
When I was running corporate development for Lumension, our first deal was a very small acquisition of STAT, a division of Harris Corporation.?
The company had done one deal prior to my arrival and it wasn’t considered a good deal. Why? Because the team that did the acquisition did so poorly.
The STAT transaction was a small one for Lumension but we had the right team in place to make it happen.
This deal allowed the new management team to learn to work together while keeping the risks of doing a bad deal to a minimum.?
It sent a message to everyone in the company that we were serious about growing through acquisitions, and it started to change the culture of the company.
Lumension went on to do several more deals, became a global endpoint security company and a major player in the industry, before being acquired and is now a part of Ivanti.
A string of pearls.
Most companies, when entering into M&A for the first time, fumble with the process.
They lack focus, make unclear decisions, and identify potential targets in a purely reactive way, jeopardizing the growth they're looking for and the very reason they're considering M&A.
Successful M&As also require a different set of skills and a different perspective. Studies reveal time and time again that the greatest predictor of success in any acquisition is experience.
Does anyone on your team have experience with mergers and acquisitions?
Does anyone have the time? It’s likely your team is already swamped with their regular workload so focusing on a new deal might be a challenge.?
Just like we had to get the right people in the right positions to be successful with the Lumension STAT deal.
If you are serious about growing your business we can help create a strategy for your specific growth requirements and ensure the deals considered are the best options for your company to grow sustainably.?
Start small and get the right team in place – and you will set your first acquisition up for much more success.
Mike
The Revenue Group
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