Lessons in M&A from the TV Show "Succession"
The hit HBO drama series “Succession” is a fun TV show where a family struggles with business issues and family dynamics. Is there something that we can learn from it? I think the show offers interesting insights into the complex world of mergers and acquisitions (M&A), corporate strategy, and business dynamics through its gripping storyline about a dysfunctional billionaire family struggling to control their global media empire. Beyond the family drama and power plays, “Succession” has key lessons that apply to real-world M&A activities. Let’s look at them.
Succession Planning is Paramount also during M&A
The show opens with billionaire CEO Logan Roy suffering a health emergency, setting off an ugly battle for control between his children, who start maneuvering to be his successor. This immediately exposes the absence of a clear succession plan, destabilizing the company’s future.
This underscores the vital need for thoughtful succession planning, especially for founder-led firms. Lack of robust plans can severely erode value and leave companies vulnerable during transitions. Clear planning ensures continuity, which buyers find reassuring. This is a general business issue and also applies to M&A. When you negotiate with target firms where the founder is still in the picture, ensure you have a plan for the time when the founder leaves the company. This can happen right after the closing or at a later point. Is there already a number 2 in the target who could take over? Do you have someone in your (acquiring) company who could take the lead at the target? Do you need to hire someone? And how will clients, employees, and other stakeholders react to that change? Will it affect the brand? How do you manage the founder if he stays in the company? I have often been involved in M&A transactions where these questions have been critical for the success after the closing.
Leave No Stone Unturned during the Due Diligence
Numerous instances in the TV show showcase disastrous M&A outcomes from inadequate due diligence (DD) - from liabilities lurking within acquisition targets to cultural clashes during the integration. Given the high-risk, high-reward nature of M&A deals, the show rightly emphasizes that no amount of due diligence is enough.
Thorough due diligence, spanning operations, financials, culture, compliance, etc., is key to properly uncovering red flags and planning the integration after the closing. The costs of missing risks far outweigh the costs of diligence. Due diligence is the time when you can take a look under the hood. Before that point, you probably already developed some ideas on how to make the M&A transaction successful, but the DD is when you can verify some of your assumptions. Don’t forget that you have limited access, so ensure you analyze all relevant risks and challenges that may arise. Hire M&A experts such as lawyers, accounting and valuation firms, and industry experts to help you during the DD. Many companies believe that their regular team can manage the DD, but M&A is very different from day-to-day business.
Master the Art of Negotiation in M&A
Complex, multi-party M&A negotiations are a centerpiece of the show. From deal structuring to bargaining tactics to managing trade-offs, “Succession” offers a masterclass in negotiation.
Negotiation is both an art and a science. You need to use critical skills to understand motivations, proactively address concerns, convey clarity, and balance relationship-building to negotiate the best terms for you. Also, use creative thinking to come up with unusual and new solutions to difficult issues that may arise during the negotiation. The third element is psychology. You need to understand the key forces of the other party because they will often drive their strategy and emotions during the negotiations.
Ensure you use the best negotiator in your company who knows how to “play the game” of negotiations. Also, invest enough time in the preparation. I have seen negotiators being successful just because they were better prepared and knew everything about the details of the deal and the other company.
Understand Corporate Governance in M&A
The show probes deep into boardroom dynamics, illustrating how critical governance mechanisms and leadership choices are for steering companies through upheavals, including M&A talks. Companies with robust governance structures, independent oversight, and board courage to make tough calls have the agility needed to undertake market-shaping mergers.
Poor governance can result in disastrous decision-making, erode shareholder value, and lead to situations where senior executives make emotional judgment calls on acquisition bids. Corporate governance is critical both at the target and acquiring companies. It’s essential to understand what rules and policies the companies follow to approve LOIs, DDs, and the purchase in the end. Does the Board of Directors need to approve the deal? Are there limits to approvals by the executive team? How about key financing partners? Do the agreements include limitations such as “subject to the approval by XYZ?” These are a few of the essential questions in M&A deals regarding corporate governance.
Separate Family Issues from Business Decisions
“Succession” can get uncomfortably real in its depiction of family drama among the billionaire Roy siblings taking a heavy toll on critical corporate decisions, sometimes with shocking recklessness. Personal ambitions and emotional meltdowns routinely hijack major M&A plays.
This highlights why family-controlled conglomerates need proper boundaries between family matters and business matters, especially during M&A transactions. Allowing family considerations to bleed into M&A deals can sabotage outcomes. Also, consider that some of the cash flows at the target company may be more personal than business-related. I had this issue in small and big M&A transactions where the founding family was still on board. Are some of the acquired companies (by the target) more a hobby than critical for the company’s success? How about the private jet? And the multi-million dollar retreat for strategy meetings? How is the dividend strategy affected by the founders and owners?
M&A Carries Monumental Risks and Rewards
The show aptly captures the adrenalin rush M&A activity sparks - the risk scale counterbalanced by the reward scale. Massive deals routinely reshape corporations and markets. However, major liability and cultural risks must be actively managed to ensure success.
With higher complexity, the risks escalate exponentially, too - integration challenges, regulatory conflicts, capital restraints, personnel gaps, etc. “Succession” does well to emphasize thorough risk assessment and mitigation planning. M&A can be an accelerator to achieve a strategic market position. At the same time, it can destroy value, and many studies show that this is not an exception. Everyone who works with M&A deals knows that it is a high-risk and high-reward world.
In conclusion, while it is just a TV show, “Succession” realistically depicts some of the stakes, intricacies, and unpredictability inherent in M&A. M&A adventures make for exciting TV drama, but success lies in diligent planning, governance, and risk management in the real world.
