Mergers & Acquisitions are key buzzwords on the market today. Before embarking on this journey, there are key elements to consider ensuring your success. Pierre La Pointe, President, Willoria Management Consulting, shares his guiding principles in an interview with Zita Banasinski, President, iZita Marketing:
Q. The world of M&As sounds exciting and glamorous. What inspired you to join this field?
A. In 2002, after more than 20 years of the corporate world, I decided that purchasing a company was the way for me to move forward in my career. It took me about 3 weeks to realise just how complex this process was. So, in order to polish my skills and provide me with the tools I needed in the world of M&A’s and start-ups, I registered in specialised courses spanning four days a week over an eight month period. I have since been involved in four start-ups, two of which I have since sold, one in which I am still a non-operative shareholder. Today, I am preparing myself to invest in a young high-tech Montreal based company. Entrepreneurship is quite addictive!
Q. Even if the financial aspects of an M&As are perfectly sound, can a cultural mismatch be perilous for everyone involved?
A. Absolutely! One should never underestimate the importance of a company’s culture and its’ real potential of adapting to a different management style. Wide discrepancies between the two cultures could cause tremendous stress on the workforce. For example, an aging workforce in a company might be resistant to working with more modern and sophisticated manufacturing equipment used at another firm.
The cultural aspects of a company are critical in the internal diagnostics and due diligence process. Additionally, a cultural mismatch can easily create flight risk of key personnel and a morose, even antagonistic, working environment at the detriment to all involved.
Q. How important are the products and services when you are considering purchasing or merger with a firm?
A. In either scenario, it becomes extremely important to have good working knowledge and experience surrounding the products or services of the target company. Not only will this underpin the operational success of your future company, but it is usually quite necessary to obtain financing. In a merger situation, I would also highlight the importance of the impact of the target company’s products or services for potential synergies with a company that you already own. The more similar the products and services are, the smoother the transition.
Q. What are the key marketing skills required in M&As?
A. Strong marketing analytical skills are a necessary tool during a due diligence process, particularly during the internal and external diagnostics. A sound knowledge and understanding of existing client base, how to reach new prospects as well as undertaking the necessary in-depth market research studies and critical analysis is fundamental. Understanding the competition, knowing where a firm is in the market, determining trends, product development and new product evolutions will help determine the viability of the new firm.
Q. What marketing aspects would you use to obtain an idea of management quality?
A. During an internal diagnostic procedure, communication and commercial policies & practices can have a direct relation to corporate notoriety and how it may be perceived externally. Marketing, by definition, is a science that a firm uses to bring a product or service to market. The routes to market, for instance, can be via retailers, distributors or wholesalers. How a company services and supports its customer base is, in my opinion, a direct reflection of the quality of a company’s management.
Q. What other approaches to marketing do you use in M&As?
A. Normally, I would suggest that one must look at the company’s position within a market versus the global market evolution over the last three years. You need to determine if the approaches towards growth potential over the next three years are adequate and realistic. Who are the main competitors? How is the positioning of the company targets compared to its’ competitors? What are the product differentiations?
Q. What would you look at beyond management, products and services quality?
A. As a purchaser, I would be most interested at the expansion possibilities to grow the business. Taking into consideration that we live in a global economy today, it is important to assess product and/or services substitution risks. I would make an analysis, or market study, on market entry barriers in the trade. I would also be looking at customer and supplier dependencies. Equally important is the company’s position in terms of sector innovations and/or fast technological change, dependence on trends or strong seasonal variations.
Good marketing skills can underpin a decision-making process during an M&A due diligence. Financial and legal aspects of a due diligence process will determine the soundness of a company. The marketing aspects will give you the information that you need to insure that you can grow the company, or the resources that will be required for the company to grow.
Are you considering buying or merging with another firm? Need guidance or simply someone to bounce off some ideas or concerns?
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