‘Project M&A’ – 10 ways to apply the science of project management to the art of M&A

August 2016  |  PROFESSIONAL INSIGHT  |  MERGERS & ACQUISITIONS

Financier Worldwide Magazine

Last year, some 40,000 companies changed ownership, for a total deal value of some $5 trillion, according to Thomson Reuters. That means 40,000 massive transformation projects people are managing – but how well are they executing them? And have they been planned using the best practices of the professional field known as project management? Do the executive teams understand the importance of their roles as project sponsors?

These questions are worth asking; if any business and leadership activity ever cried out for project management skills, it is M&A.

Below are 10 steps to doing it right based on observing and managing many large integration projects.

Ask why. Which problem are we trying to solve, or which opportunity we are trying to capture? One of the fundamental premises of project management is the pre-launch sanity check, as in: Should we be investing our scarce time, limited money, and some of our best resources to deliver this project (or series of projects) at all? Take the time to reflect, step back and look at alternatives before pressing the ‘kick-off’ button.

Be selective. M&A generates projects, and sometimes there are too many of them. M&A projects are usually managed as large programmes; one single integration programme can encompass up to 1000 projects and last two to three years. Thus, 40,000 M&A transactions represent up to 40 million projects. Leaders need to make trade-offs, accelerating some projects and delaying or suspending others. This requires some self-knowledge and soul searching. What is the best use of our existing and future financial and operational capacities? Which projects will create the most value for our company and its stakeholders? Providing the means to answer those questions more rationally is precisely the objective of what is called ‘project portfolio management’.

See the whole puzzle. Recognise that the current M&A ‘project’ and the myriad sub-projects are only one part of a larger set of projects for the corporation as a whole, which most likely is going through other larger transformation projects at the same time. M&A projects are usually managed as large programmes, and these projects can become complex algorithms involving multiple departments. You may be counting on IT staff to do A for you and marketing to do B, but meanwhile their calendars say X and Y.

Be linear. Time may be relative in the universe at large but it is truly linear for M&A. Any merger or acquisition is essentially a transaction with a beginning, middle and end. To be sure, the exact date of the ‘beginning’ and the ‘end’ are debatable, but once they are defined, a timeline can be sketched. Before communicating the acquisition and integration timeline, make sure you apply project estimation best practices. Define a top-down high-level plan and adjust it with a thorough bottom-up estimation based on the detailed planning of the individual projects. Once the timeline is officially communicated it can focus the organisation in delivering the plans.

Secure the highest level of sponsorship necessary. The presence or absence of sponsorship can make or break an M&A project. When it comes to M&A, there are multiple levels of oversight, and the more significant a transaction is, the more levels of oversight are necessary. In some cases, your transaction merely needs senior management sponsorship; in others, CEO sign-off; in others, board approval; and in others still, a majority vote from owners. Know what kind of sponsorship you need and do what you can to ensure it.

Define and obtain resources. No matter what a project is called, it typically needs a variety of elements, including but not limited to people, money, time, leadership, support and, as mentioned, sponsorship. Part of the challenge of an M&A project is defining and obtaining those.

Anticipate drag and overconfidence. Multiply the initial time and cost estimates by an appropriate factor. Due to overconfidence in estimating, most projects take longer than expected. Do you know from experience how much longer? Is it 10 percent? If so, multiply estimates by 1.1. If double, multiply by 2.

Don’t forget Monte and Murphy. One of the best tools in project management is Monte Carlo simulation, which will help you think about what can kill your project – a la Murphy’s Law. All kinds of random events can occur, and the pace and quantity of results can be ragged. Imagining plausible scenarios and plugging them in will improve your forecasting ability.

Sell to your internal stakeholders. The marketing team for your company or client is likely to focus on external public relations for the transaction. If you are managing an M&A project, internal PR will matter more and cannot be delegated. If the project buck stops with you, people had better like you – and the project. On average, an M&A project manager should spend between 60 to 80 percent of his or her time communicating.

Keep score. The movement of a project in time does not mean there is only one line to track. Actually, there are many. The success of the Balanced Score Card approach shows the multiplicity of metrics good project managers track. Be selective. Focus on ‘outcome’ metrics: don’t forget that your ultimate goal, as project manager, is to ensure that all the benefits of the deal are captured.

M&A projects are here to stay, in the millions. Many will continue to fail due to poor project management – or none at all. It is up to the executive team to apply best practices, even before the deal is signed.

Dr Alexandra Reed Lajoux is chief knowledge officer emeritus of the National Association of Corporate Directors and a co-founder of Capital Expert Services LLC, and Professor Antonio Nieto-Rodriguez is the creator of concept Projects Inc. Dr Lajoux can be contacted on +1 (202) 255 7562 or by email: arlajoux@nacdonline.org. Professor Nieto-Rodriguez can be contacted on +32 479 809418 or by email: antonio.nieto.rodriguez@gmail.com.

© Financier Worldwide

BY

Dr Alexandra Reed Lajoux

National Association of Corporate Directors

Professor Antonio Nieto-Rodriguez

Projects Inc