How to Formulate Your M&A Strategy By Matt Arsenault

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Some business leaders may see M&A as a self-contained strategy to grow their companies’ sales and brands. But in the view of corporate development executive Matt Arsenault, this line of thinking can be detrimental to a firm’s financial performance. In this enlightening M&A Science podcast episode, Arsenault explains why corporate leaders should instead consider M&A as a way to accomplish a company’s strategic goals and create enterprise value. Executives and investors will find this a thoughtful and detailed analysis.

Take-Aways

• A stand-alone M&A strategy can create long-term brand and financial problems.
• An enterprise-wide endeavor is the most effective way to develop and implement an M&A plan.
• Executives should align robust M&A target scorecards with existing internal metrics.

How to Formulate Your M&A Strategy Podcast Summary

A stand-alone M&A strategy can create long-term brand and financial problems.

Executives should consider mergers and acquisitions as part of a holistic enterprise strategy that focuses on building the corporate brand, growing the business and capturing market share. Leaders need to know the marketplaces that their companies are aiming for and to allocate capital accordingly. They should use M&A to complement other ways of growing into that vision.

“One of the things that I learned very early on from one of my clients, who were serial acquirers, was that M&A is not a strategy in itself. M&A is a tool of a corporate strategy.”

M&A for the sake of acquiring another company, without regard to its long-term financial and brand fit, can be extremely problematic. Many M&A errors stem from a misunderstanding of how a transaction will ultimately affect customers.

An enterprise-wide endeavor is the most effective way to develop and implement an M&A plan.

Executives should communicate with employees, like product managers and sales people, who interact with clients. This bottom-up approach provides unique perspectives on M&A targets, which may not surface inside a leadership team, and executives can better discern which firms, particularly entrepreneurial ventures, will add the greatest value to the organization.

“It’s better to have 2,400 employees thinking about corporate development than the small team of three or four or five that we have on a consistent basis.”

Executives should use a “market map” of goals, competition and customer concentrations to define their focus. The further an M&A target is from an acquirer’s core competencies, the more difficult it is to make an acquisition successful.

Executives should align robust M&A target scorecards with existing internal metrics.

An effective M&A scorecard tracks the target’s relevant key performance indicators. Some examples are sales quotas, customer turnover, success rates and time to close deals. The metrics translate into actions and deliverables.

“What I make sure I’m doing in M&A is thinking about where we want to be anywhere from 24 to 48 months from now, and finding ways to accelerate that and own something today.”

Executing integrated M&A is a complex process, particularly when the acquirer is entering a new market and assessing the competitive landscape. The chief executive officer plays a vital role in guiding a cohesive M&A strategy, evaluating the economics underpinning an acquisition and acting as the final decision maker on potential deals. But the CEO is not alone in the process; the chief financial officer, chief operating officer and inside counsel, among others, will have seats at the table. An â€œintegration management office” can help identify potential targets and manage the M&A scorecard. 

About the Podcast

Matt Arsenault is vice president of corporate development at Jamf, a software firm.