A simple M&A model for all seasons

Abstract

To discern what makes some acquirers more successful than others, Bain & Co. performed a 15‐year longitudinal study of 1,600+ companies in the US, the UK, France, Germany, Italy and Japan doing 11,000+ deals plus interviews with senior executives. Bain’s analysis of the companies that succeed at deal making and integration shows that they share some key practices which can be boiled down to this simple playbook: get into the game in good times and bad. If you’re not doing deals, your odds of outperforming go down relative to your competitors that buy steadily. Do not try to time the market. Start small. Cut your teeth on smaller, lower‐risk deals before you try the big ones. Build your team and your expertise in an environment where mistakes will have the least impact. Create a core deal team. Set up a standing team that will keep gaining transactional experience and will not be subject to much turnover. Pull the line in early. Ensure that line managers buy into the deal and that they know what they’re buying. After all, the operators are the ones who will have to integrate the acquisition and make it a success. Chill deal fever. To cool down deal fever, insist on high‐level approvals for deals or set up the compensation system to tie rewards to the long‐term success of the business, rather than deal completion. Most important, set a walk‐away price and be prepared to walk away from a deal that doesn’t meet your high standards.