Your plan to buy, no matter how well crafted, is only as good as the people who execute it. Acquisition is a team sport for two reasons. Practically speaking, buying a company involves multiple skills—more than any single individual could possess. Just as important, successful growth requires multiple perspectives. You need to see the opportunities and risks of a potential purchase from many points of view.
Here we take a close look at your acquisition team—what I call the ‘‘A-Team.’’ When should it be formed? What are the key roles? Who needs to be included? What is the leader’s function? How does the CEO fit in?
Acquisition Is a Collaborative Effort
First, we might do well to look at how acquisition teams are usually assembled and how the Roadmap approach I’m advocating is different from standard industry practice. Everyone who embarks on a company purchase knows—or quickly discovers—what a wide range of expertise is required. Of course, the skills involved are not needed all at once. Early on, for example, your focus is research. Then, once a target has been selected, you need great negotiators and people who can appraise a company’s value. Due diligence draws you into more technical accounting waters, and then there are all the legal aspects that must be handled. Finally, special management expertise is demanded to achieve a successful integration of the two entities involved. What usually happens is that each of the requisite experts is engaged as and when needed, and then slips out of the picture. In other words, there never really is a ‘‘team’’ in the sense of a consistently active group of people focused on a common goal. Instead, a succession of players comes and goes under the direction of one or two executives.
The lack of coordination and single vision that results from this habitual practice is one of the prime reasons so many acquisitions end in failure. Imagine an orchestral concert in which the players keep drifting on and off the stage to play their part of the symphony. There would be no cohesion, no theme—in fact, no music.
When I undertake an acquisition for a client, I always insist on this principle: The entire acquisition team will be recruited right at the beginning, and every key player will be involved throughout the entire process—in other words, ‘‘from beginning to beginning.’’ Our A-Team is more than a succession of experts: It’s a brain trust, a mastermind forum for decision making that develops a collective understanding of the whole acquisition process.
Building the Internal Team
Your acquisition team should consist of a mixture of people drawn from the ranks of your company and experts engaged from outside. The first step is to win the commitment of your CEO and/or company board to making an acquisition based on your single strategic need. This may sometimes be difficult but is essential to the remainder of the acquisition process. A strong commitment from the top empowers your team and gives its members confidence that their efforts will have a definite outcome—that an acquisition will be made. Tepid support can discourage bold choices and in the process lead to stagnation. What you need from the CEO is a signal of willingness to entertain the unavoidable risks of external growth—a signal that you can reinforce if your team starts becoming overly risk-averse.
Support from the CEO must include complete alignment with the end result that you and your acquisition team have defined. Think of building a home. If you simply say ‘‘I am building a house’’ to ten different people, they will each have ten different visions of what that house will look like. They understand the concept—building a structure for shelter—but will have different plans and blueprints to get there. Commitment from the CEO entails adopting a shared vision of what the team is working toward.
With strong backing from the top, you can move forward with selecting your internal acquisition team. The first person to appoint is your Acquisition Coordinator, who functions (in football terms) as the team’s quarterback. The Acquisition Coordinator’s job is to manage the process and drive it forward. This key individual usually has another job title in your organization, such as CFO or director of business development, and therefore carries other important responsibilities. Nevertheless, he should expect to spend a minimum of 50 percent of his time on the acquisition process: Anything less, and it will be impossible to effectively lead the team.
With the Acquisition Coordinator in place, you can now enroll the other players. A distinction in the Roadmap approach is the functional team structure. It would be natural to imagine that the team would be organized in terms of M&A skills. In reality, I have found it more effective for the team members to represent each of the primary areas of your company: production, sales, marketing, financial, legal, human resources, and so on. Note that the representative may be the head of a department but does not have to be. Each company function will be impacted by the acquisition, and each has unique insights that can help form a sound judgment of a target’s appropriateness or value.
Even if your acquisition strategy focuses on just one of these areas, having a team member from each department prevents ‘‘silo thinking.’’ Let’s imagine that your strategic need is to obtain a new technology that will primarily benefit production. Each of the other areas is still affected, though some more than others. Human resources must consider the technical qualifications of current employees and future hires, legal might have to worry about intellectual property issues, and sales will have to figure out how to alter the sales strategy once the new technology becomes available.
Team Dynamics: An Unusual Management Challenge
An acquisition team is unlike any other team that you have operating in your company. The responsibilities placed on its members are likely to be larger and more demanding than any they have assumed in the past. Buying another company is a massive undertaking, with complex ramifications for the future of the enterprise. Most of your employees are accustomed to delivering information and advice to a higher decision maker, rather than shouldering decisions themselves.
For a successful outcome, the A-Team must observe certain ground rules. When a decision is needed, it is important to arrive at a genuine agreement among the team members, like a jury acting in a legal trial. That means that once a decision is arrived at, everyone is fully committed to it. Unity of agreement gives the team authority throughout the rest of the company, and some hard battles may need to be fought along the way to a purchase. While the acquisition team is by no means a democracy, there is a requirement for every member to clearly voice decisive opinions. When the crunch comes, no one can sit on the fence.
No one can hide. For those new to the process, there may be some training required to support the team in fully taking on its responsibilities and freedom of action. With your acquisition team in place, you are ready to start the search for the optimum target company. Good luck!
Excerpted, by permission of the publisher, from Successful Acquisitions by David Braun. Published by AMACOM, a division of American Management Association. Copyright 2013, David Braun. For more information, visit www.amacombooks.org