M&A thought leadership: Frontloading makes sense in M&A processes
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Failing early is cheap
We know from software engineering and design thinking that failing early in the process is cheaper than failing in later stages. We adapt this thinking to the M&A process and care for ensuring merger integration success during due diligence. I call this frontloading.
Successful integration and synergies as an objective in all phases of the M&A process.
So, why are we doing frontloading? Frontloading is driven by the objective to prepare and run a successful merger integration project. All detectable risks, efforts and obstacles are identified and taken care of during due diligence already. These risks, efforts and obstacles relate to the target and the acquirer, too.
Mitigations or eliminations for risks are planned or executed during due diligence. Merger integration efforts are being estimated and planned. Any obstacles we could run into during merger integration are being identified and elimination or mitigations are planned. Examples for obstacles are missing resources or missing budgets for merger integration. While missing resources could be mitigated by leveraging additional resources or adaptation of the merger integration plan, missing budgets could be planned for already during due diligence.
Effects of frontloading
There are several positive effects of frontloading for the operations of mergers and acquisitions business:
A more realistic evaluation if the merger makes sense at all. Clarity on adverse topics like risk and obstacles completes the managerial view to take an informed decision about a merger. Frontloading increases the ability to get a complete and holistic view of the planned merger and merger integration.
A more appropriate expectation setting with executives monitoring the merger integration. When the executives approve the merger, they know about the potential risks, issues and obstacles that were or were not mitigated.
More realistic integration plans and integration speeds. When you know what to do in merger integration and you have enough capacity and ability to integrate quickly, all is fine. If this is not the case, you risk failing during merger integration or creating bad integration decisions and results. Frontloading helps to avoid some of these adverse events.
a clearer picture of risks and mitigations earlier in the process.
Less bumping into obstacles. Let us be clear. Nobody likes to run into a roadblock like missing budgets and losing momentum of integration efforts. This is why we care for identifying and eliminating obstacles. Are we able to eliminate all roadblocks in merger integration? Definitely not. But we reduce the sheer number of obstacles and we can dedicate more of our time and attention to the remaining obstacles.
As a consequence, all companies should adopt frontloading in due diligence, no matter if the deal is an asset deal or a share deal, if the target is a public company or not.
How well does that resonate with you? Please let me know your thoughts.
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Will a shortage of M&A experts push automation in M&A processes?
This blog is in the Top 25 M&A blogs worldwide according to Feedspot
Mergers and acquisitions (M&A) transactions entail intricate negotiations, thorough due diligence, and the amalgamation of various systems and procedures. Historically, these responsibilities have been managed by experienced professionals possessing substantial expertise in M&A. Nevertheless, the escalating volume and complexity of M&A transactions have resulted in a deficit of such specialists, rendering it progressively arduous to identify suitable talent.
The scarcity of M&A professionals has induced organizations to explore novel approaches for enhancing efficiency and efficacy within their activities. Given the persisting vacancies in key roles, firms are progressively looking towards automation as a strategic instrument for refining and optimizing their procedures.
Through the utilization of technology, companies can automate numerous facets of the M&A process. For example, advanced data analytics tools can facilitate the due diligence process by swiftly and accurately scrutinizing extensive data sets to pinpoint potential risks and opportunities. Similarly, automation can streamline financial modeling and forecasts, diminishing the dependency on manual computations and enhancing precision.
Automation not only heightens efficiency but also alleviates the risks associated with human oversight. M&A transactions are intricate and demand meticulous attention to detail. Manual procedures are susceptible to errors and omissions, which can yield significant ramifications. Conversely, automation diminishes the probability of errors, ensuring a smoother and mistake-free M&A process.
Moreover, automation enables the swift execution of M&A transactions. By automating repetitive tasks, companies can expedite the overall process, thereby seizing market opportunities more effectively and maintaining a competitive edge.
It is imperative to recognize that while automation can optimize efficiency and mitigate risks, it should not be perceived as a substitute for M&A professionals. Rather, it should be regarded as a supplementary tool that enhances the competencies of experts in the field. Human expertise, intuition, and negotiation prowess remain indispensable in the realm of M&A.
In conclusion, the deficit of M&A professionals might expedite the adoption of automation in M&A operations. It is increasingly evident that organizations must devise innovative solutions to bridge the talent gap in this domain. Automation provides a means to streamline processes, boost efficiency, and minimize risks. Through the integration of technology alongside expert knowledge, companies can navigate the intricate landscape of M&A with greater dexterity and triumph.