From the Trenches of M&A: Lessons Learned From Over 20 Deals

After working on over 20 M&A deals and having taken them from deal structure, due diligence, initial integration through to fully integrated operations, there are themes, trends, and ‘gotchas’ that emerge regardless of the size, geography or nature of the deal.

And there are lessons – so many lessons learned - but a few key ones stand out.

If you are considering a merger or acquisition, whether it is a marriage (two independent parties coming together), a divorce (a subset of owners leaving a larger firm) or a divorce/marriage combo (a subset of owners leaving a firm to join another firm), here are some key considerations as you navigate the decision to move forward.

Key lesson 1: No deal is plug and play

Perhaps it exists, but over almost two dozen deals, I simply haven’t seen it. To get to 1+1=3 which is the essence of any purposeful deal, it needs vision, planning, active management, tact and creativity – none of which are passive acts. In my experience, the transition from deal to fully integrated operations tends to span about three years. By that point you either reached above-mentioned accretive arithmetic or if not, you likely never will.

Key lesson 2: The numbers are only a part of the story

Clients often come to me asking for help with financial modelling whether or not their prospective deal is a good one, expecting to solely examine the past performance of the target firm.

Two issues here: one, the past isn’t a reliable indicator of the future, and two, what is more important is the joint vision for the future.

Unless the acquirer and acquiree are clear or what is driving the deal, where accretion will come from for both sides, and there is alignment on key principles, the numbers don’t really matter.

It’s like the old joke: the professor asks a lawyer, doctor and an accountant what is 2+2? The lawyer says “well it’s four.” The doctor says “if you remove the plus sign, push the numbers together it could be 22.” The accountant looks at it for a while, then says “well what do you want it to be?”

Key lesson 3: Clarity, clarity, clarity

Language is a fascinating subject in that two or more parties can be speaking the same one and yet walk away with a completely opposite understanding of what was said. This rings true in M&A deals all the time.

What is even more common is not openly discussing detailed expectations. Whether it is the romance of the deal or adrenaline of the close, a propensity to leave details for ‘later,’ or a lack of recognition of what seems like a small thing but will inevitably become a huge issue, there is lots of room to add clarity of expectations.

How will the acquiree’s day-to-day change? What is expected of the founder who used to make decisions on the fly and now has to collaborate with fellow owners? Who has discretion over what decisions, and which are made centrally? They are not necessarily fun topics but where integrations go south is usually over the less interesting items where expectations differ. Think of it like transitioning from dating to moving in together: arguments happen over the most seemingly trivial things.

Key lesson 4: Change is hard

No matter how much preparation, discussion of what is to come, the level of change management etc. the bottom line is that when the switch gets flipped and the deal moves from planning to actual integration, it is tough for everyone involved. From the acquirer’s team to the acquiree’s team, to long-term clients having to adapt to some changes. No one is spared.

Are there ways to mitigate and minimize the impact of changes? Absolutely. But it is important to acknowledge the human factor and even the boldest will get tired and perhaps worn down, so remembering the humanity of everyone involved is critical.

Key lesson 5: Have a sense of humour

Even the best laid plans, most experienced teams, and heart-forward leaders will have to jump a few hurdles. What makes a difference is a sense of humour and remembering to ‘zoom out’ when it seems like it’s getting to be too much.

“But this is serious business!” they’ll say. “There are huge dollars on the line, careers, clients etc!”

Yes, yes yes. No one is saying do stand-up comedy at a funeral. If it’s a really serious matter, by all means take it seriously. But 8 or 9 times out of 10, it will be very ‘figure-out-able’, and approaching it with levity will help move forward more efficiency and effectively.

My favourite source of perspective is when something goes wrong is stating “well there’s a plot twist!” It has been known to completely shift the mood of the team from stressing out and focusing on what went wrong and how it’s bringing them down, to a certain perspective and focus on how do we move forward and fix. The ability to remember why we are doing this deal, where we want to get to, and being honest that plot twists happen, tends to move teams through issues more smoothly. Plus there are few more effective team bonding moments than sharing a laugh or two.

The bottom line is that deals tend to be part art, part science, and invariably rooted in people at every step of the way.

Having the right mindset from the beginning of pursuing an M&A strategy is critical, as is having the right team to highlight issues, opportunities, and gotchas. For more information on how we can help with your deal, whether you are buying, selling or looking to depart an existing practice, contact us.