Because the corporate acquisition process has changed, you as an entrepreneur need to understand who the new players are and how the process works now in order to better navigate. Today's post will look at the new and most influential players within the corporate acquirer.
So if you read yesterday's post, you know the investment bankers and research analysts no longer influence (read: force-feed) acquisitions that a company might make, the global equity research settlement of 2002 took care of that, and CEOs no longer champion deals, the Sarbanes-Oxley Act of 2003 took care of that, so who is getting all of these deals getting done?
The new deal champions, if you can even call them that anymore, are the head of corporate development and the head of the business unit in which the target is going to be integrated. Because these two people will have significant staff investments in due diligence and integration, they are now the most influential in getting the deal done. Yes I know the CTO and the HR manager are very important in getting the deal done but not as important as these two people.
The goals of the BU head are centered on revenue and margin growth - acquisitions provide a way to quickly give existing customers the new features they want, win new accounts and cross-sell. Successfully garnering an acquisition also gives the the BU head a lot of positive visibility within the organization. These people are risk takers who are looking to move up. I know this because I've worked with many of them.
The goals of the corporate development officer are much different. They usually want to keep their job, do a handful of good if not great deals every year and get a bonus, maybe even a raise, at the end of the year. Acquisition mistakes, write-offs and meltdowns jeopardize all of these, so this person tends to be risk adverse, yet very diligent and careful with a great attention to detail and process. I know because this is what I do.
Your goal should be to make your company very attractive to the BU head and me from several perspectives: strategic, due diligence, valuation and integration. The higher you rank in these areas, the more of an asset you are (BTW - yes I do rank all deals in these areas). Figure out how your company can achieve a high ranking, how you can best position your company, how it can become easy to integrate and how you can make my job easier. Look, I don't pay the highest multiple for the target that is the most strategic or has the nicest projections or prettiest book. I simply pay the highest multiple for the highest grade - it's a risk reward relationship for me. The higher the grade, the lower the risk, the bigger the potential reward for both of us!
Tomorrow's post will look at how the process has changed within corporate buyers and the current acquisition climate.
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