Companies that make more acquisitions are more likely to identify the right targets, to develop the capabilities required to vet deals better and faster, and to form the organizational muscles to more effectively integrate acquisitions. They create learning systems that help them build unique, proprietary sets of M&A skills and capabilities that are deeply rooted in their strategies and applied repeatedly to new deals. They sustain institutional investments in their M&A capabilities, much as if they were building a marketing or manufacturing function from scratch.
Every merger or acquisition needs a well-thought-out deal thesis—an objective explanation of how the deal enhances the company’s core strategy. The thesis spells out how the deal will add value to the target and the acquirer. For many acquirers, viewing a deal through the lens of scale vs. scope yields critical insights about the long-term value of a potential acquisition. Scale deals involve a high degree of business overlap between target and acquirer, fueling a company’s expansion in its existing business. In scope deals, the target is a related but distinct business, enabling the acquirer to enter a new market, product line or channel.
Integration should start with the unique deal thesis, with integration task forces structured around the key sources of value. Teams need to understand the value for which they are accountable and should be challenged to produce their own bottom-up estimates of value, right from the start.