You often hear the saying that timing is everything, and in M&A this can be so true. More often than not, timing is only one factor that leads to a successful transaction. There are a number of other factors that often get left out of the great timing stories I hear. Today I am going to focus on one planning and making tough decisions.
Working with a lot of company founders, we see the good and bad traits of an entrepreneurial personality. I know a founder who built a pretty successful company. The entrepreneurial skills he initially brought to the company included making fast decisions on product features, priorities and the sales process. As the company grew, these skills began to get in the way of effectively managing a more complex set of products across a fast growing and more geographically diverse company.
Youve probably heard this story before and are asking yourself what this has to do with timing. Well, heres what happened next. The market segment his company was in began to consolidate and when the timing was right for him to enter into the fray, he couldnt. He couldnt because he was he was told by M&A advisors that he wouldnt get the valuation he felt he deserved. This was in part because his company wasnt as profitable as his peers due to the lack of planning and holding people accountable to their commitments. Another part of this was that he had a number of employees that the company had out grown and he hadnt done the right thing by managing them up or out or by bringing in a stronger layer of management. And part of it was that he didnt have an effective product planning process so his new product pipeline wasnt as robust as his competitions.
So, while timing is very important in M&A market dynamics, even more important than timing is being ready. How do you get ready? Things like migrating to more formal management and staff evaluation processes. Moving toward more formal and regimented planning processes. Building a strong board of directors or advisors, made up of more than just friends and industry experts, but also some experienced CEOs who will tell you the truth when youre unable or unwilling to see it yourself. This will probably prove harder on you at times and be less fun, but it is a fact it will raise the odds that your timing will be right.