There are many rationales for approaching a merger or acquisition, all of which revolve around a single word: OPPORTUNITY. Opportunity to gain market share through strategic leverage, opportunity to break out of a declining market segment, opportunity to create a liquidity event for founders and shareholders. And yet, regardless of the reason for pursuing M&A, the process itself often causes the CEO’s focus to shift from driving revenue and growth to the mechanics of the deal: valuation, negotiation, deal structure, taxes. This is particularly true when the company is approached directly by a strategic acquirer, and the CEO, with Board support, attempts to capitalize on the opening by running a self-managed transaction.
I have some personal experience with this exact situation from a large corporate acquirer’s perspective. In 2012, I led the strategic acquisition of a small but successful commercial software company with about 70 employees. The firm had three different solutions offerings serving three separate market segments, all of which were attractive to our Fortune 100 firm. I approached the target company directly and developed a relationship with the CEO that ultimately led to an acquisition effort.
The process was driven by our large and experienced Corporate Development group. Weekly internal calls involving 40+ individuals from legal to finance to HR planned in great detail the numerous due diligence requests for the target. The target company suddenly found itself overwhelmed, with only their CEO and CFO able to respond to those requests, due to the highly confidential nature of the discussion. With no M&A Advisor guiding them or protecting their interests, the company struggled to maintain current operations during the process, and business began to suffer.
The simple truth is that the CEO hasn’t the bandwidth to run an effective M&A process and the company at the same time. If an M&A transaction is in your future, be sure that you have an experienced M&A Advisor in your corner to block and tackle the process while you focus on running the business.
There’s no reason for you to lose the business while you chase the dream.