Formulating M&A Strategy for Proactive Sourcing

Mergers and acquisitions are a critical part of any business, yet they can be very risky. Therefore, a clear strategy is necessary for deal success. A well-planned deal strategy enables companies to proactively source deals rather than be reactive. Without the right target, what is the point of M&A? In this article, Mike Kryza, Head of Corporate Development at the Guardian Life Insurance Company of America, discusses formulating an M&A strategy for proactive sourcing. 

"The M&A strategy needs to start with the overall business strategy. Without the business strategy, it would be like the tail wagging the dog, as opposed to the other way around." - Mike Kryza

Strategy

According to Mike, corporate development only assists business leaders, but the business leaders are the ones who manage and direct the organization to grow. Corporate development usually works with many business teams, and their role is understanding the business strategy. 

Often organic growth is not enough to achieve the business strategy, and that's where M&A comes in. Corporate development finds the gap between the current state of the business and its objective to look for inorganic growth opportunities. Therefore, M&A should support the overall business strategy, not the other way around.  

Building a Pipeline

The first step to building a pipeline is to do a market map. Corporate development needs to understand the industry before identifying the right company for acquisition. From there, corporate development can start building their list of companies suitable for the business's strategy. Guardian’s list mostly contains companies they have existing partnerships with. Transactions are often easier when companies choose a target they already have an established partnership with since both companies already know each other. 

However, having a list is not enough. The potential target list needs to be prioritized because not every company has the same strategic value. At Guardian, they do research on every company on their list through websites, news, and third-party databases. Using that information, they force rank every company on the list based on different criteria depending on the vertical and their strategy. 

Outreach

Due to technology and social media, getting contact information is very easy these days. There are also instances where bankers approach them with opportunities and contact information. When approaching companies, Mike always opens up the conversation by offering a partnership, unless the target company is playing in the same vertical they are dominant in. 

The goal of the initial outreach is to get the target on a call, share Guardian’s story, and express why it would be beneficial for both parties to work together. Mike talks to around 50 to 100 companies in a year, and having regular conversation with companies is what allows them to proactively source deals.

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