Last updated on June 23rd, 2023 at 06:58 am
INTRODUCTION
Everyone knows 2020 will be remembered for its unprecedented volatility, but until now nobody asked dealmakers how they were able to convert high levels of volatility into success. M&A does boost companies’ growth and value, but the bet-the-company deal isn’t the route to success. A research by McKinsey has shown that companies who ‘regularly and systematically pursue moderately sized M&A deliver better shareholder returns than companies that don’t’. Multiple smaller deals generated more long-term value than infrequent big-ticket transactions. And companies who relied on organic growth or made selective acquisitions actually showed losses in returns. This continual stream of transactions – or ‘programmatic M&A’ – is what builds success. However, these deals ‘need to reach particular thresholds of frequency and cumulative value to make a real impact’.
Programmatic M&A
Programmatic M&A requires careful strategy, planning and systematic action – not once, but continuously. M&A requires mastery of capabilities through repeated deals over time. Companies that execute programmatic M&A over years, often decades, become true masters of the art of identifying, negotiating, and integrating acquisitions. It is ‘precisely because these companies are doing deals systematically, and believe that they are building lasting, distinctive capabilities in M&A’. Acquirers should treat M&A as an ongoing commitment in order to maximize outcomes. Don’t ever underestimate the amount of work involved in the due diligence process and the post-deal integration of assets. Deal strategy should be treated on par with the overall company strategy when it comes to maximizing value, as both of them involve the optimization of information and processes.
Buyers nowadays are hungrier than ever for acquisitions than ever before and the pandemic has provided them the opportunity to buy out a rival who hasn’t weathered the COVID storm well. Moreover it doesn’t necessarily need to be a multibillion-dollar acquisition to make a significant difference over time. Buying out is critical for both innovation and steady, long-term growth. Why try to build something, when you can readily buy it. Having built the best-practice frameworks for M&A over multiple transactions, enables them to easily access the right resources and efficiently replicate past successes.
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