Many companies use M&A to transform themselves, not just to grow. Having a strong M&A capability in-house is becoming more and more a necessity for organisations to adapt and transform. Are you in a process of building this strategic M&A capability in order to support transformation? Are you looking for M&A professionals to hire to accelerate the process of change?
The current wave of acquisitions goes well beyond the typical defensive, synergy-driven, horizontal integration that marked previous M&A spurts. These new deals are taking parent companies in uncharted directions. Businesses aren’t acquiring other businesses simply to expand what they’re already doing, but more and more to survive over the medium to long term.
Though some recent acquisitions may seem rather unique, they all have in common the need to find new avenues for growth in mature markets or deal with accelerating change.
Some deals may be driven by accelerating capability upgrades in areas like technology, manufacturing or R&D. Other deals may serve as a means to accomplish market breakthroughs, in terms of building a distribution network and gaining a foothold in a particular market in a relative short time frame. Sometimes when it comes to seizing opportunities among unreserved consumers, industry needn't be a barrier to execute on an acquisition strategy.
As these cases show, contemporary acquisitions increasingly cross industry segment lines. They often extend rather than consolidate and upend rather than consolidate markets.
Whatever the imperative, recent transactions suggest a growing belief among business leaders that many of the things considered essential to company performance – including technology, talent, customer bases, products and services – can be impossible to achieve unless a company with these distinctive capabilities is bought.
Nevertheless, these are very risky bets to make. For them to pay off, companies can’t assume that whatever they buy can be reshaped into something strategic. Any unknowns, from customer dynamics to the new organization’s value proposition against competitors, must be made known. How realistic is leadership’s vision for the acquisition? What role does the acquisition play in advancing a strategic agenda? What will it cost to make it all happen? With asset prices at record levels, careful due diligence is more critical than ever. Are the capabilities in place to facilitate the merger or acquisition, whether external or internal?
Business leaders also must consider the process they’ll use to capture sought-after strategic benefits once the acquisition closes. The tradition of absorbing target companies into the corporate parent is giving way to more nuanced approaches. Is this capability of dealing with more nuanced integration approached present and at hand?
As acquisitions become more unconventional, and their stakes continue to rise, companies will find that their outcomes hinge on strong competencies in due diligence and post-merger integration.
No organization can remain the same. But the changes that modern companies face are happening too quickly for them to respond with the assets and resources they already have. In this environment, acquisitions – often daring ones – are a differentiating factor. As a result, they’ve become an ongoing responsibility among executive teams accountable to investors, customers, employees and their own exacting standards for success.
Having a strong M&A capability in-house is becoming more and more a necessity for organisations to adapt and transform. Are you in a process of building this strategic M&A capability in order to support transformation?
Would you like to learn how we can support you in developing this M&A capability? We’d be happy to connect with you and present our services, no strings attached.
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Strategy | M&A | Restructuring