2012 Merger & Acquisition Mandates For Value Creation: Pursue These Four Major M&A Strategies

2012 will be a return to full speed ahead for M&A. Cash is available, boards are demanding growth and organic growth is still slow. 2012 may not be as robust as 2007, but it will significantly move in this direction, especially when compared to 2008, 2009, 2010 and 2011.

It is therefore very important that we redouble our efforts on two critical requirements while we pursue the four strategies for M&A value creation. These two requirements are speed and due diligence.

Speed: Setting a Pace for Results

To capture maximum value from an acquisition there must be a pace set that will facilitate speed from the initial contact through to the creation of real value. The target, the stake holders, the marketplace and your competition will all be watching this speed of acquisition and will value the acquisition based on the speed of achieving results.

Due Diligence: Getting It Right

When engaging in an M&A activity, there is no trade-off between creating it quickly and doing it right. To do it right means to assure that the three major M&A due diligence processes are vigorously pursued:

	Commercial due diligence, cultural due diligence and supply chain due diligence. Commercial due diligence addresses the financial, legal, labor, intellectual property, IT, environments and markets.
	Cultural due diligence addresses leadership, management and organizational behavior. Culture refers to the perception of the people within the organization of how they work, how things are done and what the organization is about.
	Supply chain due diligence addresses the processes, people and technology of the supply chain mega-processes: PLAN-BUY-MAKE-MOVE-STORE-SELL.

All three due diligence processes should provide a look at opportunities for revenue growth, cost reduction and the risks associated with the merger or acquisition.

With these two critical requirements of speed and due diligence in mind, the logical next step that should follow is value creation. There are four strategies for creating value in M&A activity: business strategy, acquisition strategy, supply chain strategy and operational strategy.

1. Business Strategy: What is the strategy for the company itself? How do their leaders plan to grow the business? Should growth come from geographical expansion, product line extension, new customers, new products, new channels, or other routes of change? What are the key strategies to enhance the company’s value and to maximize profitable growth?

2. Acquisition Strategy: How would the acquisition support the business strategy? What would be the desired outcome from a merger or an acquisition? Are there risks related to this acquisition that outweigh its benefits? What is the profile of an ideal merger or acquisition target? Is it preferable to integrate the acquisition into current operations or leave it as a standalone unit?

3. Supply Chain Strategy: What are the potential supply chain cost reductions and synergies of the merger or acquisition? What should be the supply chain strategy to realize the value of the merger or acquisition? What should be the strategy and organization behind the new company’s supply chain after the merger or acquisition?

4. Operational Strategy: What should be the strategy behind the design of the operational processes after the merger or acquisition? Once the processes are defined, then what should be the strategy behind the people who will support these new processes? Lastly, what should be the technology that will enable these people to efficiently and effectively perform the desired processes?

Pursuing these four hierarchical strategies with speed and aggressive due diligence will assure the realization of your firm’s value creation through M&A. A failure to focus on speed, due diligence or the pursuit of structure before strategy will create M&A failure and the loss of value for your firm. The opportunities presented in 2012 will be significant, and when approached with the right planning and strategy, will lead to profitable growth and supply chain value creation.

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