To start, let’s be honest, inside the strategy development realm we get up on shoulders of thought leaders like Drucker, Peters, Porter and Collins. Perhaps the world’s top business schools and leading consultancies apply frameworks which are incubated through the pioneering work of those innovators. Bad strategy, misaligned M&A, and poorly executed post merger integrations fertilize the organization turnaround industry’s bumper crop. This phenomenon is grounded within the ironic reality that it’s the turnaround professional that often mops inside the work of the failed strategist, often delving into the bailout of derailed M&A. As corporate performance experts, we have found out that the whole process of developing strategy must take into account critical resource constraints-capital, talent and time; at the same time, implementing strategy must take into account execution leadership, communication skills and slippage. Being excellent in either is rare; being excellent in both is seldom, when, attained. So, let’s talk about a turnaround expert’s view of proper M&A strategy and execution.
In our opinion, the essence of corporate strategy, involving both organic and acquisition-related activities, may be the pursuit of profitable growth and sustained competitive advantage. Strategic initiatives have to have a deep comprehension of strengths, weaknesses, opportunities and threats, along with the balance of power inside company’s ecosystem. The business must segregate attributes which can be either ripe for value creation or vulnerable to value destruction for example distinctive core competencies, privileged assets, and special relationships, as well as areas at risk of discontinuity. In those attributes rest potential growth pockets through “monetization” of traditional tangible assets, customer relationships, strategic real estate, networks and knowledge.
The company’s potential essentially pivots for capabilities and opportunities that can be leveraged. But regaining competitive advantage by acquisitive repositioning can be a path potentially full of mines and pitfalls. And, although acquiring an underperforming business with hidden assets as well as other kinds of strategic real-estate can indeed transition an organization into to untapped markets and new profitability, it’s best to avoid purchasing a problem. All things considered, an undesirable company is simply a bad business. To commence an excellent strategic process, a business must set direction by crafting its vision and mission. After the corporate identity and congruent goals are established the path might be paved the following:
First, articulate growth aspirations and see the foundation of competition
Second, look at the life cycle stage and core competencies of the company (or perhaps the subsidiary/division in the matter of conglomerates)
Third, structure an organic and natural assessment procedure that evaluates markets, products, channels, services, talent and financial wherewithal
Fourth, prioritize growth opportunities which range from organic to M&A to joint ventures/partnerships-the classic “make vs. buy” matrices
Fifth, decide where you can invest where to divest
Sixth, develop an M&A program with objectives, frequency, size and timing of deals
Finally, use a seasoned and proven team able to integrate and realize the significance.
Regarding its M&A program, a company must first observe that most inorganic initiatives don’t yield desired shareholders returns. With all this harsh reality, it’s paramount to approach the method which has a spirit of rigor.
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