Taking charge: How to navigate mergers and acquisitions

Seasoned M&A pro Roger Parry shares his top tips for successful takeovers.

Even for those accustomed to competitive corporate culture, mergers and acquisitions carry particularly cutthroat connotations: think hostile takeovers and jilted employees carrying Banker’s Boxes out of their offices. While things rarely play out with that much drama, any entrepreneur preparing for such a scenario would be wise to take some pointers from an M&A veteran like Roger Parry.

Back in his native Britain, Parry is well known in business and media circles. He worked as an economics reporter for the BBC in the 1980s, then took on executive roles at various tech and media companies, including international media giant Clear Channel, data firm YouGov and motion-capture and analytics org Oxford Metrics. He is currently a volunteer advisor at MaRS and a non-executive director at Uber.

Over the years, Parry has navigated dozens of mergers and acquisitions. As he notes, there are good reasons to pursue such deals: scaling size and capital, entering foreign markets through a previously established company, assessing valuable research or up-and-coming technology. “M&As are extremely helpful tools in the corporate toolbox,” he says.

Although Parry has been part of many hugely successful negotiations, he has also witnessed his share of deals that have fallen through before the paperwork was signed. As a result, Parry has developed a keen sense of relevant priorities and pitfalls. Here, he shares some crucial points to keep in mind during any M&A process.

Don’t bank on a talent takeover

Acquiring a new company goes beyond growth. It can be a strategic way to get access to a competitor’s product, yet-to-be-released tech or data and market knowledge that’s been kept under wraps.

Parry recognizes the value of a tech-focused takeover, but he cautions against assuming talent is part of the package. Once the M&A dust settles, there’s no guarantee employees will stay. As Parry points out, it is not uncommon for senior staffers to cash in shares and stock options as they make a hasty exit. Those who helped build a company from the ground up might not savour the prospect of working for someone new, and the visionaries who attracted buyers in the first place might be more keen to venture out on their own. If a deal is predicated on existing talent, losing that talent can be an expensive mistake. “It’s better to undertake aggressive headhunting,” says Parry.

Do your own homework

From accounting firms to investment banks to legal aces, there are many stakeholders involved in the M&A process. Outside experts may be necessary to push a deal through the door, but they are no substitute for putting in the time and effort to find out as much as possible about a company before signing on the dotted line. “The honest truth is those people are not that valuable,” Parry says. They’ll handle the legal and financial due diligence, to be sure, but such professional advisors “are principally interested in getting the deal done and don’t have to live with the consequences.”

Parry stresses the importance of making an independent effort to gather extensive information about a potential acquisition’s network, infrastructure and reasons for selling in the first place.

“A management team should talk to customers and suppliers to really understand how the business functions before consummating the deal,” says Parry. “Understand their objectives and motivations, because sometimes companies sell for the wrong reasons.” Those might include an internal managerial conflict, a key client jumping ship or a growing awareness that a firm’s proprietary technology will soon be redundant.

Embrace difficult conversations

No matter how you slice it, the merger and acquisition process is rarely a smooth one. It may seem counterintuitive, but addressing challenging situations up front can mitigate turbulence in the long run.

“You’ve got to be ruthlessly honest, and early on,” says Parry. “If you intend to reduce the workforce by 30 percent, say so. Which offices will stay open, and which will close? Who will be the CFO? Better to answer these questions during negotiations rather than risk a falling out after the deal is done.”

Sure, there’s a risk that any areas of conflict could jeopardize the M&A before it coalesces — but as Parry notes, that’s actually a good thing.

“If I look back at the deals I’ve been involved with over the years, those uncomfortable conversations sometimes blew things up, and in retrospect that was the right outcome,” says Parry, who stresses that such dissolutions ultimately saved him more headaches and dollars than the deal was worth.

Reassess for success

Sellers, take note: choosing to let someone acquire a company is not an easy decision. Parry emphasizes that parties on both sides of the M&A equation should weigh every last option.

“Many growing companies have an ambitious expansion plan that needs significant capital, but might not be attainable under the current management or corporate structure,” says Parry. “You have to be absolutely certain you’ve run out of runway under current conditions and can’t raise [that] capital on your own.”

While awkward conversations and pseudo-corporate espionage are often part of the process, M&As can nevertheless be advantageous, and there’s ways to tell buyers and sellers are benefiting from the deal.

“A merger and acquisition is successful if it’s achieved revenue and scale, but that can’t materialize without a solid business plan,” says Parry, who recommends a mutual problem-solving approach. If a deal is done, staffing and logistics changes are in place, and everyone is on board to achieve the next phase of growth, consider that a reflection of M&A success.

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