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Creating a dedicated M&A function can be daunting for non-acquisitive companies. It’s a big commitment that could take away valuable time and resources from top level management. However, when done right, corporate development muscle can be built slowly, and organically. In this article, Kyle Price, Chief of Staff & Corporate Development at Roblox, shares his experience on how to start an M&A function slowly and successfully from scratch.
“There's a strategy component that goes with the pipeline, and you have to have buy-in with those leads that if we were to acquire these capabilities, it would accelerate our roadmap.” - Kyle Price
When to build an M&A function
Don’t force building an M&A function. Start by talking to different product leaders and engineering leaders and explore what they need to achieve acceleration. Also, start talking to different companies and understand what type of company and technology is needed. Through this process, a pipeline will emerge. It will ensure that the acquisitions are aligned with the overall company strategy.
Deal sourcing
When sourcing deals, warm leads are generally more valuable. They already go through some degree of natural vetting because they know people or they know the network or they know you.
Overcoming anti-M&A culture
When starting out acquisitions, there will always be people in the company who are skeptic. It's easier when there is a top-down mandate, and the CEO signs off on everything. During a bottom-up approach, people bring in their own perspective, and overcoming it is not a one-size-fits-all.
The best thing to do is practice empathy and put yourself in their shoes. Some people may have had tough experiences with it in the past. Understand where that skepticism comes from, and prove your worth by doing successful acquisitions.
Evolution of corp dev
After a few successful acquisitions, then it’s time to get more dedicated resources. For efficiency, keep the team lean with a few core members who can handle major responsibilities throughout the deal process. This includes pipeline development, negotiations and integration.
If the goal is to continuously do M&A, the next step is to hire dedicated cross functional partners for integration. This includes developing integration shops and project management skills.
Handling biases in the M&A process
Decision-making biases are normal. To combat this, use red team exercises. This is where somebody pitches the case on why the acquisition is a horrible idea. You can bring a skeptical engineering leader and tell them about the deal and see if you can convince them otherwise.
But at the end of the day, go with the leader’s intuition. If the deal sponsor and the corporate development partner aren't feeling the deal for whatever reason, don’t do it.