What M&A can teach the Trump transition

In a recent report, Deloitte explores the similarities between a presidential transition and mergers and acquisitions in the business world.

The report, called The Presidential Transition: Translating lessons from mergers and acquisitions, shows how lessons learned from M&A activities can be used by people involved in the new transition.

A presidential transition is large and complex. “Up to 4,000 new political appointees will assume leadership of a $4 trillion annual enterprise comprising hundreds of agencies, including seven that, in terms of budget, would rank among the 50 largest companies in the Fortune 500,” according to the report.

“This is truly going to be a non-incumbent election, which is also extraordinarily rare in the last 100 years. It is really important to look at what we can learn from what is a much more common phenomenon—corporate mergers and acquisitions—and how lessons learned from that universe can be applied to how to think about presidential transition,” said Greg Pellegrino, principal at Deloitte and one of the report’s co-authors.

The report highlights components of each event:

• CEOs and leadership teams identify and acquire companies for value creation, as opposed to the President-elect and incoming administration, who establish new leadership and, for some agencies, set a new course.
• The deal team researches and screens acquisition targets and performs due diligence on target companies, much like how the transition team researches federal agencies and deploys “landing teams” to conduct in-person due diligence.
• A company’s board of directors approves the CEO’s strategy and overall transaction and is then subject to approval; similarly, Congress passes a budget and approves political appointments.

The report then delved into the structural similarities between the two kinds of transitions, noting that each could be broken down into six phases—strategy, screening and preparation, due diligence and review, execution and governance, planning and integration, and execution.

“When you look at successful mergers and acquisitions, the change management, the communications strategy and the acknowledgement of the cultural differences between the organizations as it comes together are vital elements of how successful the acquisition will be and how quickly that success will be obtained,” Pellegrino said.

“Transition leaders in the federal government can learn from our research and come up with strategies that apply what we have defined as the nine key lessons of mergers and acquisitions to presidential transition,” he said.

These nine key lessons include:

• Start with the end in mind
• Assess yourself from the “outside in”
• Establish leadership and accountability
• Control the integration
• Plan for an issue-free day one
• Expand and front load benefit capture
• Provide clear and consistent communications
• Stabilize workforce and retain critical talent
• Coordinate complexity without disruption

Speaking of the impact on the government contracting industry, Pellegrino acknowledged that there might be some uncertainty in the coming months. “Any type of transaction of this scale has the potential to be distracting,” he said, but he believes there will eventually be a great deal of opportunities driven by new thinking.

Click here to view the entire report.