Adapting to the new world order of M&A

Elias Mazzawi, Independent Consultant and expert in integration and growth, explains how recession, higher interest rates and supply side challenges are triggering huge changes in the world of M&A.

The days of the mega deal are gone, at least for now, and the era of opportunistic and strategic bolt-ons is coming. Deals that might not have been possible while the economy was booming are emerging,  The landscape is changing and with it a shift in what drives value.  M&A is resilient and pivoting; mid-market and smaller.  Companies are increasingly looking to the revenue line for disproportionate value add from integration.  

Whole greater than the sum of the parts strategies and revenue opportunities represent substantial and possibly game-changing value creation, requiring a different approach and way of thinking, and for some a new ball game in terms of skills, activities and culture.

Strategy 1

Cross-sell is often the jumping-off point; selling in a discrete product or service from one part of the organisation to a client of another. In terms of potential, typically it delivers incremental rather than game-changing revenue, one product at a time. Organisation and infrastructure-wise, it requires channels and processes which can be once-off or campaign-based and mobilised typically through pragmatic CRM operations, incentives and fairly focused pipelines.

Strategy 2

Client management synergy - for businesses with an over-lapping client base across multiple divisions or acquired ‘OpCos’ - is a step up from cross-sell.  Actively managing clients across organisational and product boundaries. Often in a highly focused manner, one client at a time or one region at a time. In terms of potential, it can have much higher revenue impact than cross-sell, delivering larger and broader key accounts that are arguably stronger and ‘stickier’.  Implementation-wise, it is unsurprisingly more complex and far-reaching. Information sharing is essential, often achieved through light-touch client account planning and management. Openness and co-operation that spans organisation boundaries requires alignment, community and trust supported by effective alignment of objectives, incentives and KPIs at OpCo and individual levels.

Strategy 3

Proposition synergy integrates products or offerings across organisation boundaries. It can be once-off for specific clients or systematic and repeatable, and can range from adding-on niche product to a core offering to a ‘match of equals’. In terms of potential, it can radically increase competitiveness and even open new markets or segments. Implementation complexity varies. Typically harder to achieve than cross-sell and often inextricably inter-twined with client synergy.

Making it happen (attitudes and behaviour)

Unsurprisingly, there is no single one size fits all approach to integrating for revenue synergy.  Most organisations opt for a bespoke hybrid, starting where there’s low-hanging opportunity and an organisational ‘will’ and enthiusiastic stakeholders - and evolve.

Knowledge, trust, alignment, community and motivation are key  and need to be in-built to the organisation’s DNA.

Successful ‘cross-OpCo organisations’ display a number of traits and pursue a number of themes.

1. Aggressively and single-mindedly build group-wide community as an overlay to business-as-usual; nudging the community to take accountability.
2. Allow the 3 strategies to intermingle and evolve,
3. Take a semi-structured approach to client management and triggering opportunities; allowing ‘structured serendipity’ to flourish.
4. Drive a highly visible pipeline of activity and up-rate commercial excellence programmes to accommodate and encourage cross-unit activity.
5. Deploy an in-house broker to catalyse and facilitate, at least at the outset.

Four potential next steps

Successful strategies are typically mobilised through an overlay to business as usual, balancing independence and accountability on the one hand with an added element of cross-OpCo connection on the other.

Paths are varied, bespoke and situation-specific. Implementation presents many challenges, transcending business-as-usual processes, P&Ls, metrics and ‘turf’.  Lessons from experience include:

1. Assemble a community as early as you can. Start small and expand. Focus on information sharing and relationship building. ‘Quick and dirty’ and light-touch works. Signal intention clearly, making it clear this is on the top-table agenda. Find ‘excuses’ to get a cross-unit community together to share information and network. Have just-enough strategy to be credible. Demonstrate top-down, active and interested sponsorship. Mobilised right, the community will fill-in-the-blanks, develop the strategy and kick-start it. I’ve used a ‘project team’, focus groups and networking events at different times and in different ways to generate and marshal enough conversations to build momentum. 
2. Nudge the community to take accountability. Measure activity and outcome. Use pipelines. Visibly and loudly celebrate success; imitation is the greatest form of flattery. Be clear that progress is expected but allow ambiguity around how that progress is achieved. Put cross-group reporting on the top-table agenda and at the right time, create a cross-group growth committee. Track everything back to a pipeline ‘sortable’ around person, group, proposition, and client. Make that pipeline highly visible, at least in the early days and consider reporting account-focused pipeline development at up to Board level.  
3. Nurture, catalyse and navigate. Aim for ‘structured serendipity’ Light the blue touchpaper; unblock and mobilise as needed. The biggest and best opportunities always come from connecting people rather than from rigorous strategies. Create ‘prompts’ to trigger connections and the environment to allow opportunity to flourish. Ask teams (often of 2-3) to develop a loose strategy around, say, 10 clients (or around a possible proposition overlap can be more than enough). Light-touch account planning around a handful of accounts works (‘what do we do now, what can I do for you, what can you do for me, what can we do together that we couldn’t do before?’). With the right people involved, and in the right environment, interaction triggers opportunity. There’s a big chunk of luck in what comes to the fore, hence ‘serendipity’, mobilised with enough strategy and a light-touch structure.
4. Deploy an internal broker to nudge things forward. Driving revenue synergy is a complex ‘matrix task’ that relies on skilled stakeholder management and organisational alignment. An internal broker makes it happen, complementing and supporting in-unit growth management and leadership. 
   • Sufficiently independent to work across borders, and appropriately senior and experienced to earn trust at ExCo level and at multiple business development levels.
   • Sufficiently knowledgeable and value-adding to ‘win the ear’ of stakeholders across the business on matters that are not always core to that unit’s scorecard. 
   • Distinctively able to problem-solve and unblock the unforeseen, particularly at the pilot and precedent stages. Able to mobilise solutions to (for example) revenue and resource allocation, and to align metrics and incentives.

The pivot to M&A from macro-economic factors is significant, and so is the opportunity. Integration and co-operation spring to the fore.  Organisation-wide engagement and alignment become paramount - supported by commercial excellence programmes.  For some organisations, these are business-as-usual, for others they require investment in new skills, capabilities and culture.