Embedded M&A Strategy

Abstract

Taking a holistic view, an Embedded M&A Strategy is an integral part of the corporate strategy and the business unit strategies of the acquiring company: On the level of corporate strategy, M&A is a tool to innovate or restructure corporate portfolios and to increase shareholder value. On the level of business unit strategies, M&A may be used as a strategy tool to get access to new products, services, markets or capabilities and to realize value potentials. Corporate and strategic business unit strategies should frame the M&A approach, as M&A is an important but just one of a set of alternative growth and value creation options for a company. Additionally, the corporate strategy is the reference point for the definition of the Transaction Rational of a potential acquisition or merger and the intended M&A targets. Based on a comprehensive strategy review, an Embedded M&A Strategy defines the detailed strategic targets to be achieved by transaction initiatives, frames the corporate finance part of potential acquisitions, sketches value creation targets, including the intended synergies, decides on the preferred external growth design, selects the assessment criteria for the profiling of the ideal target company and the Fit Diamond assessment. The E2E M&A Process Design also intends to Frontload two mission-critical integration issues into the M&A-Strategy: On the one side by Diagnostics of the Standalone Business Designs of the target company and the acquirer and by drafting of a Blue Print of the intended Joint Business Design, on the other side by Diagnostics of the Standalone Culture Designs of the target company and the acquirer and by drafting of a Blue Print of the intended Joint Culture Design. This Frontloading of Business and Culture Design issues intends to increase the likelihood of integration success. Once such a consistent and detailed M&A Strategy is defined, potential target companies could be evaluated, selected and integrated into a long-list of potentially attractive targets. Based on the Fit Diamond, meaning a more detailed strategic, financial, synergistic, Business Design and Cultural Gap assessment, the long-list of target companies will be boiled down to a short-list of highly attractive potential transactions, which serve as a starting point for a dedicated M&A initiative.