“Sometimes, the best investments are the ones you don’t make” Donald J Trump
The legal sector will consolidate further in the next five years. It is too fragmented, with only a few firms having distinctive and sustainable differentiation. The macro environment, pricing pressures, competition and technology will increase the pressure to deliver economies of scale or knowledge advantage. For a firm with ambition this may be the time to build the capabilities and strategic insights that will secure a victory in the M&A stakes. Here we take a look at M&A from three perspectives, sharing insights from the political sphere, military special operations and the corporate world.
Strong and stable
M&A activity has similarities with political elections. Both are characterised by ego, groupthink and promises, and both are usually followed by underwhelming reality. While a small number of partners and managers are focused on strategy and deal-making, for most the killer question is ‘will I have a job and who will be my boss?’. This inward focus can sap energy, engagement and morale. In an election, a political party needs a strategy, a simple manifesto, engagement of the party and strong and stable leadership. In M&A a law firm needs the same, to weather the period of integration.
Purpose, simplicity, speed
Admiral Bill McRaven, when a young naval SEAL officer, was intrigued by the question ‘what common factors assure special operations success?’. He analysed a dozen operations spanning more than 40 years and the factors he identified were clarity of purpose and a simple plan, executed with speed and surprise. For each operation McRaven considered the achievement of key objectives and the probability of success over time and found that early achievement of the objectives had a major impact on the probability of success. The same concept is valuable in a M&A setting where both parties are vulnerable. Speed to deal signing, organisational design, consultation, appointment announcements and the successful integration of business objectives will determine when the line of relative superiority is passed, where there is more likelihood of success than failure.
Professionalised capability My experience on the leadership team of a global organisation provided insights into successful M&A operations. The company had a strategy of growing in part by acquisition; however, we experienced a series of failed bids or missed opportunities. Organisational weakness resulted in us being too slow and unco-ordinated to seize opportunities or react quickly when they arose. The weakness comprised: L No defined responsibilities for the leadership team and their subordinates during M&A activities L No defined decision-making process for initial assessment and deal-making L Lack of a co-ordinated approach to business case development L Weakness in managing base business plans, and the execution of plans to deliver integrated targets
We addressed this by applying techniques from the successful project management of our product innovation side to M&A. We defined roles and responsibilities for all those in the new business team, along with a simple ‘new business stage gate process’. We installed a governance team with a seasoned project director to quarterback all new business projects. She had access to the resources of the global strategic projects team at the right point in the process, enabling the co-ordination of functions, planning and implementation on a global scale. Did it make a difference? Absolutely. Soon after setting up the capability we ran a mid-sized business acquisition that took less than 100 days. The ability to analyse the deal, understand and qualify the business growth drivers, develop plans, do the deal and then move to rapid integration validated the approach. One bank remarked: “This is the first time we’ve seen such an integrated plan and implementation from end to end.” So this sort of approach can deliver either a landslide victory or an early No vote, either way avoiding a lengthy and damaging stay in the period of vulnerability.
This article originally appeared in The Lawyer on 13th March 2017, click here to view the white paper.