Developing an M&A Thesis

Every company wants to evolve and grow its business, and M&A is one of the fastest and most powerful ways to grow. If done correctly, M&A can transform an organization overnight but there must be a sound M&A thesis. Without an M&A thesis, acquirers might end up wasting time, money, and opportunities. In this article, Siran Tanielyan, SVP, Corporate Development at Paramount, will discuss developing an M&A thesis. 

"An M&A thesis is a by-product of consistent conversations with the C-suite, business unit leaders, and continued assessment of the available assets." - Siran Tanielyan

What is an M&A Thesis

An M&A thesis is corporate development’s formal projection of where a specific area in the company can use M&A to accelerate the corporate strategy. The M&A thesis should answer three questions:

1. What areas can be strengthened to deliver on the corporate strategy?
2. Which areas can be supported by organic investment and which ones need inorganic growth?
3. What are the specific targets that are best to support the goal? 

Often, corporate development cannot answer these questions. They must spend time with the business leaders, technology team, and product team to identify existing gaps.

How to Build an M&A Thesis

Corporate development's role is to determine the organization's capabilities and how the capabilities can achieve the overall strategy. Here are the steps to building an M&A thesis:

1. Corporate strategy - The thesis aims to support achieving the corporate strategy. Everyone must be aligned with the goal. 

2. Collaboration - Have strong partnerships and a regular cadence with the business leaders to see the areas where they could benefit from acceleration.

3. Capital allocation - Not every company has unlimited funds for M&A. Understand the limits of funds for inorganic growth.

4. Targets available - Look at companies that can help achieve the desired growth. 

5. Buy-in leadership - If no dedicated leader takes responsibility for the success of the acquired business, the deal will fail. Ensure leadership buy-in before proceeding with the deal. 

6. Establish consensus - M&A touches every facet of an organization. Getting buy-in from all the other constituents within the company that the transaction will directly impact is critical. 

If successful, corporate development is now in a position where they can proactively pursue deals to help achieve the corporate strategy. 

The biggest challenge when developing an M&A thesis

The biggest challenge when developing an M&A thesis is getting the commitment and bandwidth of the business unit leaders. Creating a thesis and working through lists of companies takes time. Understand that business leaders have day jobs and other priorities. Getting their attention and commitment is a constant struggle that most corporate development teams face. 

Corporate development must develop a strong relationship with the business leaders if the company wants to be proactive in M&A.