M&A Habits to Increase Your M&A ROI
Habits can change your life. We've all experienced the power of habits in our personal lives, for better or worse. Initially, it is challenging to adopt good habits such as exercise, reading, saving money, and practicing mindfulness, but their results compound over time to greatly benefit our health, finances, and overall well-being. On the flip side, if left unchecked, bad habits like poor sleep, unhealthy eating, procrastination, and negative thinking can slowly erode our energy, focus, and life satisfaction.
Can we apply this to business processes and M&A to improve the results? I believe so. The habits we cultivate determine your M&A performance and ROI. Let's take a closer look.
The M&A Habits That Make Or Break Deals
M&A is one of the most complex actions a company can undertake. With so many shifting pieces, deals can lose momentum, become unfocused, or veer off track entirely. With such high stakes and complexity, habits are like the rails keeping the train from derailing as it speeds towards its destination. Consciously instilling the right high-impact habits provides the connective tissue to successfully navigate the M&A lifecycle from the M&A strategy development to the integration and value capture. Strong habits equip teams to evaluate opportunities thoughtfully, plan and prepare, execute the deal, and systematically drive the intended synergies and business improvements. Simply put, good habits are the difference between achieving outstanding success or disappointing results with your M&A program. Let's look at some of the critical M&A habits that make deals successful:
M&A Habit #1: Periodically ensure the M&A investment thesis aligns with the company strategy.
Regularly audit each deal to ensure it directly supports and remains aligned with the company's overall M&A strategy and investment thesis.
Rigorously pressure-test that the specific deal rationale, synergy estimates, and financial model assumptions remain valid even as circumstances change.
Comprehensively stress-test the investment thesis, pushing past the "echo chamber" effect that undermines objectivity.
M&A Habit #2: Regularly check that you actively identify and manage M&A-related risks.
Systematically identify, track, and mitigate risks through granular risk management practices versus broad-brush risk overlays.
Plan scenarios for likely obstacles and roadblocks instead of over-optimizing for uninterrupted deal execution.
Meticulously develop contingency plans and define clear escalation paths for when issues inevitably arise.
Having problems and risks is not an issue. Not solving and mitigating them is.
M&A Habit #3: Continuously improve your due diligence lists and prepare Quality of Earnings (QoE) reports.
Design a focused, hypothesis-driven diligence plan that validates the key assumptions underpinning projected sources of value.
Prepare a Quality of Earnings (QoE) report that "normalizes" (i.e., adjusts) the reported numbers.
Apply prudent, probability-weighted risk factors and value opportunities net of all realistically estimated costs and risks.
M&A Habit #4: Regularly check in with stakeholders and your team members.
Meet regularly with your M&A team to share vital information to achieve the investment thesis.
Ensure that key stakeholders of the M&A deal are regularly updated about the status of the deal.
Report objectively unfavorable development and create a solution-focused environment.
M&A Habit #5: Manage people and processes, not Excel sheets.
Focus on crucial members and improvements of critical processes first.
Ensure everyone understands that people and processes are the leading indicators of improving financial results (lagging indicator).
M&A Habit #6: Implement an M&A After-Action Review (AAR) process.
Like any other business process, the M&A process requires regular reviews and adjustments to get better.
After-action reviews are structured evaluations conducted after a project, task, or event to analyze what was expected to happen, what actually happened, why it happened, and what can be learned for the next time.
Focus on the specific actions that you and your team can influence.
By establishing these habits around M&A, you ingrain focus, objectivity, thoroughness, adaptability, and accountability into evaluating, pursuing, executing, and integrating deals. Each habit creates value in its own right, but the compounding effect of layering these habits separates strong M&A performers from the rest.
The Path to Habit Formation
Like any meaningful habit change, embedding these powerful disciplines in how your company approaches M&A is far easier said than done. It requires organizational commitment, leadership alignment, diligent process design, and a willingness to push through the inevitable inertia.
Start by identifying the specific habits your M&A team should focus on developing based on your historical challenges, strengths, and overall deal strategy.
Next, detail the concrete behaviors, activities, and cadences that underpin each habit, mapping out what ideal performance looks like.
Then, invest in areas like team training, documented processes, playbooks, and software/tools, and reinforce leadership communication to support M&A habit adoption and adherence.
Celebrate demonstrations of the desired habits and cascade learnings from deals that effectively represent the behaviors you wish to institutionalize.
Incentivize leaders and team members, embedding habit reinforcement into performance review criteria.
Be prepared for periodic lapses, as old engrained habits can stubbornly resist change. But persist, reinforce, and remain focused on developing the cadence and reflexes that enable consistent, high-impact deal execution. It's this sustained commitment, over the years, that cumulatively builds the foundational habits behind elite organizational M&A capabilities.
Master the Habits, Reap the Rewards
M&A is a highly rewarding but challenging pursuit when executed sub-optimally. Failed acquisitions mean missed opportunities that can destroy millions, and sometimes billions, in shareholder value while consuming countless hours of effort. In contrast, optimized dealmaking rooted in the right habits unlocks transformational growth and a capacity to capitalize on business opportunities. For organizations genuinely committed to building sustainable M&A capabilities as a core competency, there is no substitute for doing the hard work of ingrained habit formation. Establish the cadences, processes, and behaviors that the most successful acquirers live by. Empower your teams with the tools, align the leadership, and reward structures that reinforce these habits. Remain committed to continuous improvement, objectively studying every deal's execution to identify and refine the habit capabilities that will elevate your game to improve your M&A ROI. The most successful players in M&A have successfully done it, and you can do it, too.
