Companies that are good at M&A are also good at ongoing development of corporate and business strategy. These organizations have a vision of what the company should look like down the road, and have a good feel for the capabilities the vision requires.
Crafting an M&A strategy involves developing an understanding and commitment to the role M&A activity should play in achieving the company's strategic objectives. A good M&A strategy:
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Delineates the scope of M&A activity ( i.e., Is the aim a fundamental transformation of the company, a few "tuck in" acquisitions to strengthen certain business units, or something quite different?);
- Develops a framework for senior managers to examine, understand and discuss the value creating potential of various potential acquisitions;
- Fleshes out a variety of integration options and how integration plans may vary across potential acquisitions;
- Develops profiles of acquisition candidates consistent with the M&A strategy;
- Reflects an understanding of realities in the M&A marketplace (e.g., pricing, financing conditions, etc.) and models the financial implications under a variety of scenarios.
This is not to say that M&A activity should be confined to achieving a rigid set of preconceived objectives. In fact, the best M&A processes inform strategy as well as being guided by it. That is, through the process of evaluating candidates and putting deals together, company executives not only hone their acquisition parameters, they can better envision what their companies could become by completing the right acquisitions.
