Understanding M&A Deals

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Nowadays, practices in M&A spectrum are all about the finance-focused M&A approach – concentrating your resources on building a financial model to create a business case and doing the deal. Then you go from there to executing a series of templates, checklists, and playbooks on the agreement.

Kison Patel is an entrepreneur and the Founder and CEO of M&A Science. He is passionate about the M&A industry and committed to driving it forward. Kison Patel was an M&A advisor for ten years, and during this period, he completed the sales of larger companies such as commercial banks and hotel chains. In 2012, Kison noticed teams lacked efficient technology to manage deals. That was when he gained the insight to create DealRoom, an M&A lifecycle management platform.

In 2016, he started the M&A Science podcast, devoting his time to creating a platform where all the best practitioners could share their best practices and lessons learned from real-life deals. Kison then created The M&A Science Academy in 2020 to offer step-by-step training to those looking to master M&A, featuring courses designed by top-level practitioners. Through developing technology, educational content, and industry training, Kison aims to bring better practices to an industry with growing market pressures, transaction values, and competition.

Kison is a man who’s studied every aspect of deal-making in M&A, including corporate M&A. In this episode, Kison shares helpful problem-solving techniques in deals. This is definitely an episode you don’t want to skip!

Best Practices That Could Apply Across M&A Spectrum

In Kison’s perspective, it’s all about the problem-solving approach - getting rid of the old ways of doing things. The old ways were mostly about asset discovery and purchasing without wasting much time on considerations and paperwork.

It’s now about the finance-focused M&A approach – concentrating your resources on building a financial model to create a business case and doing the deal. Then you go from there to executing a series of templates, checklists, and playbooks on the agreement. Kison mentions the old ways aren’t completely ruled out as it is still effective if you’re trying to buy factories or hard assets.

Kison continues by saying most deals these days are all about technology - tech startups, which are more complex, and there are several things you need to put in place before the deal closes. Some of these are:

  • You need to initiate changes. You also need to understand these changes may lead to a disconnect and frustration among team members. Avoid getting yourself in this situation; that is why you shouldn’t be all about the finance-focused M&A approach. You need to develop a great emphasis on moving towards the people-focused M&A approach.
  • In whatever you do, have your team in mind. Start with a couple of elements to see the level of productivity you can achieve. You don’t want to go through the journey with a team that doesn’t believe in the project. An uninspired team can wear you down, and you need to set the tone right from the start.
  • You need to maintain clarity on your goals. YOU as a business owner needs to understand every team member should have a vivid understanding of what the business is all about. Also, have in mind a goal has a limited value when it’s vague.
  • You need to validate the financial model and make it realistic. You can identify the stakeholders that fit your models and get them involved. Make sure you update them as you go through the process and continue to validate your assumptions. A bad financial model could lead to failure.

The definition of failure is very vague in the industry. The meaning of failure always goes back to the original financial model - the investment plan they have for the deal. Most times, failure isn’t a total implosion; it may be success that took longer.

Threats In M&A

Kison shares what he believes to be the biggest threat in M&A. To him, the biggest threat in M&A is when you become the people’s problem. We’ve seen that historically! Thinking and planning is the main thing in M&A deals. You need to think and plan upfront. Deals blow up when you don’t think it through. You need to execute the management approach - it’s more about having an approach where you respond to the changes as they happen. You should learn to identify risks and provide solutions as they come.

Another threat in M&A is getting fixated on the financial model, but we forget that the money you generate is the outcome. The important thing to focus on is the capability to create value, and we mostly lose sight of that.

Having the wrong team leader is a NO. This problem is a perennial business killer. You need a fitting leader who’s customer-centered, who will help create a realistic go-to-market outline, and an aim to deliver value to customers.

Of course! None of these matters if you don’t understand the organization's value. Executives from both sides should spend time understanding the organization's value. Understanding the values allows you to understand the organization's culture, leadership approach, decision-making, and problem-solving model. That’s when you get a sense of “what are some of these differences that could be complementary,” and many more important questions that will inform your decision on the deal. Also, Know your market and identify the traits of a strong leader to drive your M&A.

 

Listen to the full episode with Kison here.

Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

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Corey Kupfer is an expert strategist, deal-maker, and business consultant with more than 35 years of professional negotiating experience as a successful entrepreneur and attorney.

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