Different components
When aiming for ambitious growth or seeking to expand into new markets or services, acquisition will undoubtedly accelerate progress. However, such transactions require careful planning and a well-defined strategy. Similar to crafting a company’s overall corporate strategy, developing an acquisition strategy involves breaking it down into distinct components. In this blog, we explore the process of creating such a strategy and the key steps involved.
Mission & Clear Objectives
Clear and concise acquisition objectives, that align to the company vision, serves as a north star for teams involved in the process. If at any stage during the deal process, team members feel uncertain about their goals or the suitability of a potential target, they can refer back to the mission statement and objectives for clarity and direction.
The most successful acquisitions typically occur when a company has a well-defined understanding of its objectives even before a suitable target emerges. This proactive approach enables the company to identify and pursue opportunities that align closely with its strategic goals and vision.
Timelines for Search, Segmentation and Due Diligence
Establishing a suitable timeline for the acquisition process is crucial, especially as inertia can often set in prior to due diligence. While many teams aim to close deals within two to three months, this time-frame is often unrealistic. A minimum six month time-line would be a more reasonable expectation.
Although timelines may need to be adjusted as the process unfolds, they provide essential structure and enable effective budget planning for the coming years. Breaking the timeline into smaller, manageable goals, such as allocating three months for company search, industry trends analysis, segmentation, classification, selection and engagement and a further three months for due diligence and post-merger integration, helps keep the process on track and aligned with broader corporate challenges.
Defining Roles:
Identifying strategic acquisition targets requires more than just drafting an acquisition mission statement. The subsequent crucial step involves assigning responsibilities for overseeing the entire M&A process. This responsibility could fall on a company director, a newly appointed M&A specialist, or an external consultancy, e.g. an industry specialist, lawyer or investment banker.
Whoever takes on this role should provide consistent feedback, regarding potential targets, advancements in deal negotiations, and the general market conditions. This ensures transparency, keeps all stakeholders informed, and allows for timely adjustments to the acquisition strategy as needed.
Specific Search:
The efficiency and depth of the acquisition search are influenced by the individual or team leading the effort. External M&A professionals typically have extensive networks, facilitating the identification of suitable targets relatively quickly. Conversely, an internal team may require more time for the search process.
Naturally, the number of suitable targets is correlated to the search parameters. The broader the search parameters, the higher number of suitable targets. Search Parameters include:
- Engaging with third party M&A firms
- Utilising online M&A databases for research
- Conducting Market research specific to the target industry
- Exploring industry specific databases for potential leads
Each method contributes to the comprehensive search for suitable acquisition targets, ensuring that all avenues are explored to identify the most compatible options.
Define an outreach strategy
Suppose you’ve identified what appears to be an ideal target company for acquisition, and now you’re ready to initiate first contact. It’s essential to approach this step with sophistication, as it’s often a critical but an overlooked aspect of the acquisition strategy. Sending generic emails to a company’s helpdesk expressing interest in M&A isn’t effective.
A strategic outreach plan may involve several tactics:
- Contacting through Third Parties: Engage a trusted intermediary such as an attorney or investment bank to make initial contact on your behalf, lending credibility to your approach.
- Sending Targeted Communications via email or letters: Direct mail to the relevant decision-maker within the target company, expressing genuine interest in exploring potential opportunities for acquisition.
- Utilising LinkedIn: Reach out to decision-makers directly through LinkedIn, leveraging the platform’s professional networking capabilities to establish a connection and initiate discussions discreetly.
- Industry Conferences: Take advantage of industry conferences to make discreet approaches to key individuals within the target company, fostering relationships and exploring potential opportunities in a more informal setting.
Most importantly, be flexible, be patient, ensure you have the full support of the acquiring board and retain momentum at all times.
To speak to a TKM Consultant about our M&A strategy whether buy side or sell side, please get in touch with Managing Partner, Anil Noorani
Out deep industry knowledge, relating to the agency, creative services and MarTech landscape will ensure you are in good hands.