July 27, 2011 | Written by: Jill Tutino
One of the most important lesson we’ve learned in supporting clients M&A transactions, is not to get deal fever. Doing a transaction, regardless of size, can be a disruptive activity. Many transactions lack a single truly accountable leader and/or vision. At the end of the day you need to step back and focus on the basics: ‘Why are we doing the deal?’ and ‘What and how do we plan to achieve it?’.
M&A transactions are emotionally charged corporate events. Sometimes they occur out of fear (“if we don’t by company x, our competitor will”). Sometimes they occur out of strategic necessity (“we really need to lock down this market or channel to deliver our financial objectives as a company”).
In any event, if you aren’t careful everyone will fall in love with the deal or fall in love with doing the deal. Functional leaders are suddenly escalated to mini-CEOs as they are deciding such heady things as who gets hired, who gets fired, and what the combined firm looks like. Sometimes M&A process is like throwing a corporate party, everyone wants to be invited, and until they’ve gone to 3 or 4 of them they are convinced they are always fun.
My best remedy to date on deal fever is to focus participants on value. I call them Value Drivers, but they can also be called Success Criteria or Deal Goals and Objectives.
Every time you do a deal now, start with a blank piece of paper and right down what your objectives are and what you view as the Value Drivers for the transaction. As you build the strategy, pick targets, assemble the deal team, assess diligence findings and plan for integration you use that same piece of paper as calibration. This is critical. As a deal leader and frankly as a participant in a deal process, you have to focus on the important stuff. You have to remove the ‘flashing lights’ and ‘endorphin-friendly’ stuff of the deal process and be certain you are creating value for the enterprise.