Marketing, Sales & Strategy Officers Practice
acquisitions, mergers, talent strategy
The author makes predictions about acquisitions and mergers.
Prediction: We are likely to see a dramatic upturn in acquisitions.
Yes, I know that economic predictions can be wildly off the mark. Freakonomics guru Steven Levitt cites the book Dow 36,000 as a particularly blatant example.
But I think I’m pretty safe with making my M&A prediction. We’ve already seen signs of it for several months and the CEOs and GMs we talk to confirm it. Certainly, the financial planets seemed to be aligned.
Companies that are emerging relatively healthy from the recession are poised to take advantage of once-in-a-generation bargains in their industries. Private equity, which of late has been tending to its portfolio companies, is awash with renewed interest in ‘latent value’ assets.
Look for an uptick in merger activity as well. But most of the action will be in acquisitions, as stronger fish gobble up weaker ones. The strong fish have healthy balance sheets and access to capital. And, with stock prices deflated for companies that have fared poorly in the recession, the opportunity to buy assets they otherwise could not afford.
But what some buyers may lack is the requisite capability in strategy. During the early stages of the downturn, many companies cut staff positions, including strategy. They were understandably focused on operations and cost-cutting, seeing strategy talent as an unaffordable luxury. Subsequently, realizing that they couldn’t cut their way to growth, many of them invested in marketing and sales to find revenues and they continue to do so.
Now, with the chance to make strategic acquisitions at rock bottom prices, they have come full circle. Once again they need corporate development officers, chief strategists, heads of M&A, hybrid strategy/marketing specialists, and heads of business development to help guide them through these historic opportunities.
So do the endangered species - the weaker fish likely to be acquired. An M&A specialist or other strategically-minded, experienced dealmaker can help make sure that any sale of the company maximizes shareholder value. Acquisition may be seen as inevitable, but that’s no reason to be fatalistic about its financial outcome.
It’s the companies in the middle – neither acquirers nor almost certain acquisition targets – that face the biggest quandary. Like other companies, they too may have jettisoned their in-house strategy and growth capability during the initial shock of the economic crisis. Now, at the other end of the down cycle, they are still standing, but they may still feel that they can’t afford to invest in strategy and growth talent.
I recall some companies earlier in the year saying virtually the same thing about adding sales capability even when the need for generating incremental revenue had become apparent. But those who made the investment are pulling out of the tailspin sooner. So could middling companies that invest in strategy talent.
The good news for everybody is that plenty of such talent is available, partly as a result of the widespread cuts in strategy roles that marked the onset of the recession. At the same time, contraction in the consulting industry has led many strategy consultants to consider taking a corporate position. We also see a lot of people with highly developed skills and deep experience in their industries who are ready and eager to step up to a top strategy role.
Few people would deny the intimate connection between strategy and talent. As leadership consultants, we always ask clients two questions: first, what is your company strategy; second, what is your talent strategy to ensure successful execution and delivery of your company strategy?
Which leads me to make what I think is another fairly safe prediction: In the next 12-18 months, acquisition-minded companies that can definitively answer both questions are likely to make the most valuable deals for their businesses.