Commercial Integrator + Security Sales October 2024 - 40

The Three Roadblocks to Successful M&A Today
BIG IDEA by Ron Davis
THE WORLD of mergers and acquisitions
(M&A) is starting to heat up. The $3
trillion of investible capital that has been waiting
to be deployed is slowly starting to find its way
out the private equity, venture capital and
founder family funds. This is evidenced by deals
such as these:
■ Home Depot will acquire SRS Distribution
in a deal valued at approximately $18.25
billion, including debt.
■ Texas oil and natural gas firm Diamondback
Energy has acquired its privately
owned competitor, Endeavor Energy, in a
deal valued at approximately $26 billion.
■ Chip design software maker Synopsys has
acquired Ansys in a $35 billion cash-andstock
deal.
■ The merger of Capital One Financial Corp.
and Discover Financial Services will bring
together two of America´s largest credit card
companies in an all-stock transaction valued
at $35.3 billion.
■ ConocoPhillips will acquire Burlington
Resources in a deal valued at $35.6 billion.
What This Has to Do With Our Industry
What does all this have to do with our industry?
Having spent the last 25 years in the security
industry's M&A deal world, representing both
buyers and sellers, we have never seen such excitement tied
to what could be the largest " gold rush " of deals that should
happen over the next three to five years.
Given all that, I wanted to spend a little time on not only what
it takes to succeed but also the pitfalls to avoid as revealed by
failed M&A deals.
For additional insight, I turned to Scott Davis, my son and the
chief growth officer of Prophet, a consulting firm focused on
helping companies grow and transform, with a big focus on M&A.
Over a pizza, I asked Scott to share some of his wisdom on
M&A. What follows is an edited transcript featuring a few of the
many questions with which I challenged Scott.
Ron Davis: What are some of the things your clients wish
they had known before the deal that they're now trying
to figure out, post-deal?
Scott Davis: It has never been more critical to get post-M&A
value creation right. We consistently see companies leave value
on the table and fail to reach their goal for value realization, or
they don't reach it in time or back away and hedge due to a lack
of confidence in the investment thesis.
In the end, closing these gaps is critical to the deal's success.
'Ultimately, every
audience affected
by the deal will
need to know how
this deal is adding
value for them.'
- Scott Davis
Words of Wisdom
Identifying gaps in the
M&A process today.
Ron Davis: What are your
recommendations on how best
to start to close the gaps?
Scott Davis: We have had countless external
reports that have revealed three crucial, yet
often overlooked, " value busters " that executives
must address to successfully achieve
the value of the deal.
The first gap we see is that too many
companies leave the sales force and other
customer-facing leaders out of the loop.
For practical and legal reasons, deal teams
typically operate in secrecy. This leads to
scrambling across the organization when a
deal nears announcement.
Marketing, communications and talent
teams are often totally disconnected, and
they're sometimes pissed that they are out
of the loop. This causes tons of inefficiencies
across brand changes, go-to-market
strategies, talent integration plans and other
critical success factors.
Ron Davis: What do you recommend
to your clients in M&A to help overcome
this first gap?
Scott Davis: It's a pretty straightforward recommendation.
It's unnecessary to complicate the
M&A process by adding members to the team
during due diligence.
Instead, build a new step or action within your deal playbook
to cascade out need-to-know information from the core deal
team directly to operating teams when moving toward close.
This will help everyone immerse themselves in the deal
opportunity and get to greater accountability earlier in the
process.
Ron Davis: What is the second gap
you have identified?
Scott Davis: The second gap is one of the largest that we see,
and it seems so obvious to us, in that there are too many deals
without a strong story of value. Just because deal teams and
capital committees understand the value-creation thesis, it
doesn't mean that the deal has a value story.
Ultimately, every audience affected by the deal will need to
know how this deal is adding value for them. Yet, internal and
external stakeholders often receive quite different versions of
the story, if they hear any story at all.
Instead of amplifying the impact of the deal through a
compelling narrative, different stakeholders are too often left to
make assumptions on the " why and what " of the deal.
40 Commercial Integrator+Security Sales & Integration | October 2024
COURTESY SCOTT DAVIS.
Commercial Integrator + Security Sales October 2024

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