7 stumbling blocks to M&A success
Clashing business development cultures can spell disaster
- By Bill Scheessele
- Mar 01, 2010
Mergers and acquisitions continue to remake the government contracting market, fueled by shifting landscapes in defense spending, procurement modifications and competitive pressures. Smaller acquisitions are becoming more prevalent than the larger, scale-driven transactions of previous years.
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In the frenzy to transform via mergers and acquisitions, significant issues might be overlooked in the haste to get smaller deals done. There are seven significant stumbling blocks to achieving growth objectives after a merger or acquisition. Overlooking any one of them could adversely affect a firm’s long-term growth.
1. M&A Strategy
Was the decision to expand based on a desire to chase shifting budget and procurement priorities? Or does a long-term strategy exist that includes adding expertise to your capabilities from firms in adjacent markets? The latter approach could bolster your market position by offering customers a comprehensive, integrated suite of products and services.
2. Qualitative vs. Quantitative Due Diligence
Due diligence means more than merely crunching numbers; it involves qualitative as well as quantitative information gathering. Take the time to evaluate the target company’s business development leadership and team from a potential and historical perspective, and assess the resident quality and capability of the entire business development organization. Is it mostly organic-growth farmers and few, if any, new-business hunters? You want to find a well-balanced, cohesive team that is working a real pipeline of opportunities with a high win rate.
3. Divergent Business Development Cultures: Push vs. Pull
Does your potential merger partner have a “push boxes” culture — that is, are products/services pressed on customers to solve any conceivable problem? Or does the business development team seek out customer issues and then decide if the opportunity is a good match for what the firm offers? The first position indicates a traditional sales, or push, culture. The second illustrates a customer-centric culture in which customers rely on your expertise, pull you into a discussion of their situation and trust you to help them solve their problems.
4. Differing Structures for Business Development Organizations
Does your potential acquisition have a centralized business development organization, a business development capability embedded in the business units or a hybrid of the two? Does the current structure mesh with yours or will the combination add a layer of complexity to what already exists at your firm? Acquisitions frequently result in combined entities with independent organizations hoarding resources and critical intelligence while dissipating the efficiencies and operational synergies you’ve banked on for the combined organization.
5. Disparate Business Development Plans
Business plans are not the same as business development plans. If business development plans exist at the potential acquisition, are they outdated and unachievable in the current circumstances? In addition to a business development strategy, what you want to see are road maps that chart how to reach concrete revenue objectives in the current business climate and have buy-in from the entire business development team.
6. Diverse and Outdated Business Development Processes
The government contracting world has changed. If business development processes exist at your potential merger partner, does everyone use them and is there proof of their effectiveness? Could you be acquiring a business development organization that’s committed to outdated processes and shuns anything new? In that situation, even if the team is struggling, members will likely reject any solid business case to change what they are doing.
7. Strong Business Development Leadership
Does your potential acquisition have strong business development leaders who model effective behavior, take ownership of plans, drive processes and lead personnel to reach revenue objectives? Or is everyone reluctant to challenge the status quo, embrace new ways of developing business and risk something different in this changed environment? If so, one of your first initiatives should be to find strong business development leaders to fill that vacuum. A good business development leader will serve as the catalyst to jump-start revenue growth and achieve the numbers you expect after the merger.
Bill Scheessele (email@example.com) is chairman and chief executive officer at MBDi, a business development professional services firm.