Despite the obstacles, the outlook for cross-sector acquisitions is positive. To make the most of convergence opportunities, growth-focused firms need to take the following seven points into account:
- Choose with care With valuations rising, buyers can help their efforts by doing more legwork themselves. “That means making greater efforts to seek out and create the connections that can lead to non- competitive situations,” says William Doran.
- Try before you buy Short term deals allow companies to test the water before buying. “Not necessarily M&A, but commercial deals of limited duration that allow participants to explore what works and whether to move on to something more significant,” says Michael Young.
- Be prepared In a competitive environment, the ability to execute swiftly may make the difference. “Just as speed to market is often critical to the success of a tech company, speed to signing and closing is often critical to the success of an acquisition strategy,” says Herb Kozlov.
- Every jurisdiction is different. For example, US buyers in Europe need to take account of tougher data privacy laws. There are also key differences in employment law. Businesses also need to understand that they may find it hard to enforce their IP rights in some countries.
- Focus on integration- oriented due diligence. “Look at elements that are going to be essential for integration — key personnel, client relationships, information technology and overlapping business units and functions,” says Doran.
- Effective communications can make all the difference in creating business synergies. Engaging with the target helps to keep the workforce on site, and can dispel the concerns acting as a barrier to successful integration.
- The right deal structure works. Sophisticated consideration mechanisms can be put in place as buyers struggle to justify valuations. Earnouts will drive deal delivery, but don’t agree to an unsatisfactory valuation if earnouts don’t materialise.