3 Insights From the M&A Elite
Corporate development executives are stuck between a rock and hard place—the current M&A market is overvalued, but boards and shareholders look to them to complete deals to meet growth targets. And the importance of getting deals right has never been higher.
In collaboration with RBC Capital Markets, MAPI studied what separates the best corporate buyers from the rest. The preliminary results were featured in a panel discussion with two experienced corporate buyers at the 3rd annual MAPI Executive Summit on May 14 and 15, 2015.
In recent years, the M&A market has seen exponential efficiency improvements. Many of the changes maximize price, reduce the risks of a failed auction, and accelerate the transaction timetable. The most successful active acquirers—those who achieve long-term stock price performance and have a strong company valuation in the public market—have developed strategies to adapt to the new sales process and remain competitive.
Here’s what top-performing companies do differently:
- Emphasize Technology: Successful acquirers are more likely to employ technology-driven strategies that position them to attract more customers by building better products rather than buying new customers through an acquisition.
- Focus on Uncontrollable Factors: Uncontrollable factors (such as market trends, hidden costs, and liabilities), not controllable factors (such as pricing and management quality), are at the forefront of diligence exercises. This early focus on deal breakers helps prevent acquiring a company with too many uncontrollable risks.
- Employ Different Pursuit Protocols: The most successful acquirers have the broadest consensus building on M&A decision making—they engage the board, CEO and at least four other executives with some influence on the M&A process. They are also savvier about M&A process dynamics and are very influenced by how crowded the field is in a process deal when deciding whether or not to participate.
MAPI members can download the results and a summary of the Executive Summit panel discussion to learn more about how manufacturing companies execute their M&A strategies.