Developing a Corporate Strategy to M&A Thesis (Creating a Buy-Plan)

M&A is a powerful tool that can accelerate business value, but it requires hard work and vision. A thesis serves as the blueprint of an acquisition’s projected value that is aimed toward achieving the overall corporate strategy. This play is designed to help new acquirers develop a corporate strategy and an M&A thesis.

Play by

Michael McDonald, CFA, CPA

Director, Strategy at Koch Engineered Solutions

About the play

This play is designed to help new acquirers develop a corporate strategy and an M&A thesis.

Play created by: Michael McDonald, Director, Strategy at Koch Engineered Solutions and Siran Tanielyan, SVP, Corporate Development at Paramount.

Preparation

M&A is a powerful tool that can accelerate business value, but it requires hard work and vision.

A thesis serves as the blueprint of an acquisition’s projected value and should be aimed toward achieving the overall corporate strategy.

This play is designed to help new acquirers develop a corporate strategy and an M&A thesis.

People

Board members, strategy team, corporate development, business leaders, functional heads, and executives

Difficulty

hard

Materials

Time

Running the Play:

Get Alignment on What the World Looks Like

Corporate development must work with the CEO, board members, and the strategy team and get clarity on how they view the world. Aim to answer the following questions:

What is trending?
What is not trending?
Where is the world heading?
What is the future of the industry?
What events could impact this industry and trajectory?

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Develop a Vision

After answering the basic questions, identify the overall corporate strategy. Define how the organization wants to win within this worldview, and how it can best position itself to succeed and drive profit. Have a clear vision and goal.

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Identify Gaps

Corporate development must pass down the mission to the business leaders. They need to collaborate and identify where the company currently stands, map out existing capabilities, and compare them to the vision to identify the gaps. The key is to have a strong partnership in a regular cadence with the business leaders to see the areas where they can benefit from acceleration.

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Capital Allocation

Not every company has unlimited funds for M&A. Corporate development must work with the CFO and understand the limitations of inorganic growth funding. This sets the tone for the type of companies the organization can target.

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Filling the Gaps

Now it’s time to find target companies to fill the gaps and fit the budget. Create an M&A thesis that should answer the following:

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

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Buy-In Leadership

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

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.