Successfully Navigating M&A & PMI Operations: Q&A from our private breakfast
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Successfully Navigating M&A & PMI Operations: Q&A from our private breakfast

Meeting Date
June 7, 2023
Event Type
XAnge Talks
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Have you recently experienced an M&A or are you considering doing acquisitions in the coming months? With current market trends, M&A and PMI are becoming increasingly popular topics. To discuss this, we had the pleasure of gaining insights from Thibault Monnoyeur and Steve Sala.

has extensive experience in business development in various leadership positions. He has managed growth and expansion operations on an international scale, including M&A and PMI initiatives, notably as CRO at Swile.

About Steve Sala

has overseen numerous acquisitions and business restructurings through various positions in M&A boutiques. He joined Believe Digital as Head of M&A.

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Why pursue M&A? Why now?

For many companies, non-organic growth is a fast answer to the need to quickly increase their revenues, customer base, product usage, and headcount. This is often the leap they need to take to gain a competitive advantage in the market.

For companies with available capital, the second half of 2023 presents a unique opportunity for consolidation. With many businesses facing financial constraints, market shares can be acquired at attractive prices. Evaluate potential acquisition targets and strategically position your company to seize these opportunities for expansion and market dominance.

They are several reasons a company choses to undertake an acquisition:

MARKET EXPANSION

IP/PRODUCT FEATURE

REVENUE GROWTH

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Regarding international expansion, it's a good idea to set up a local team coming from the HQ (or hired locally) to kickstart the business organically. This team with a well-established culture will significantly facilitate the integration process later down the road. - Thibault Monnoyeur, Operating Partner

The M&A process and the teams involved

Where and how to source M&A opportunities?

You can source M&A opportunities via tools or platforms such as: Orbis, Crunchbase, Specter or Alvo (french marketplace).

In many ways, M&A sourcing could be compared to a sales process. Once identified, you can score your acquisition opportunities and contact them accordingly.

You can also turn to investment bankers, some of whom are specialized by sector.

Here is a list of investment banks curated by XAnge:
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Warning: Since M&A banks work on a success fee basis, your deal size must be sufficiently high so they prioritize your search.

What should be our main focus during the due diligence phase, particularly with regard to the team?

During the Due Diligence (DD) phase, it's crucial to understand what you're buying (people, IP) and how to preserve it. Also, it's important to prepare for potential disappointments and identify how much they could impact the deal.

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Assume that you will experience disappointments. - Thibault Monnoyeur, Operating Partner

Start your M&A process by listing all the key assets you want to get out of the deal (legal, IP, people, operations, revenues…) and assess them accordingly with local advisors.

IN HOUSE
OUTSOURCE
TIPS/WARNING
Operations
x
People
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Could be difficult because of deal confidentiality. Make sure not to brand those meetings as a “PMI audit”.
Legal
x
IP
x
Financial Accounts
x
Revenue recognition can be difficult. Make sure to dig into the billing files.
Tech
x

How to manage multiple M&A opportunities simultaneously?

Treat both opportunities equally. It's important to put the same effort into both and act as if the other doesn't exist.

Leading the M&A operation

Do I need to structure an internal M&A team?

It is recommended that someone at the top of the organization oversee this either part-time or as a priority (depending on the deal size and M&A strategy). This person could be the Chief of Staff, the COO, or a dedicated Head of M&A.

This person's responsibilities include:

  • Creating the scorecard to analyze M&A opportunities;
  • Contacting and Analyzing them;
  • Aligning the interests of all parties and facilitate open discussion to converge interests;
  • Setting up a dedicated committee to advance and address problems;
  • Providing a global perspective on success, create teams, and establish alignment with a person from both the acquiring company and the acquisition to reassess each strategy for the company.

When scaling through acquisitions, the human factor is key for your company’s trajectory. Invest time, and if possible resources, in these teams to navigate restructuring initiatives effectively. Ensure clear communication, empathetic decision-making, and effective change management throughout the process.

Should the acquiring CEO be involved into the M&A process?

Of course the CEO will be involved in all the M&A process.

BUT! The acquiring CEO and their team should be seen as the “good guys”. If you work with external consultants or auditors, let them handle the tough discussions. It’s crucial to maintain a good relationship with the to-be-acquired company’s top management and team in a PMI perspective.

We recommend that the CEO not be involved in discussions regarding negotiation of the LOI, company valuation, and other similar matters.

How to deal with founders and key people of the to-be-acquired company?

Involving founders in the process can be valuable, but it's important to ask why they would want to stay post cash out. It's also important to consider the integration vision and the level of autonomy the founders will have.

It’s crucial to co-build the PMI process with a founder and high executives of the acquired company to ensure cultural fit and minimize PMI risk.

It is important for the acquiring team to perform a talent review in order to identify high potentials and low performers within the to-be-acquired company. Based on the findings, the team should plan the integration accordingly and rely on key people.

How to manage the funds of a company that is to be acquired?

You have to understand the roles and how is the relationship between top management and the shareholders. Who is leading? When do the shareholders have to be in the loop?

We highly recommend you to list the key topics or decisions you won't give up on and share them with the shareholders. This will facilitate the discussions.

Financing the M&A operation

Building a robust relationship with your bank is crucial to successfully finance M&A operations. For instance, some banks offer financing lines for external growth (ranging from 10M to 20M). However, they often prefer bundling consultation and financing services..

Venture debt is another option, but remember, you will incur fees whether or not you draw on the line of credit. So, make sure you're confident about proceeding with the operation.

You can also explore bond options, which can offer flexibility in repayment terms.

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Covenants: These are essentially rules regarding debt. If a covenant is broken, it could lead to a loan default. Utilizing bonds might offer more flexibility in repayment terms.
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Do you want to know more about bank relationships and cash allocation? Read our Cash Management & Responsible Banking PracticesCash Management & Responsible Banking Practices

Handling Post Merger Integration

Post merger integration is a play of governance and management (people).

Does it have to be full integration or no integration? Are there any in-between solutions that work?

Integration post-acquisition may take various forms: full, partial, or none at all. The chosen path depends largely on the desired level of interaction between the teams of the acquiring and acquired companies.

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No integration or a partial integration only will inevitably create problems in the longer term. - Thibault Monnoyeur, Operating Partner

How to build the PMI plan?

The best PMI plan should co-build a new and unified company culture.

Working on a PMI plan, aligning interests of all parties is important. This involves open discussions and co-creation. Regular meetings, such as in a steering committee, can help to address and resolve issues.

Best practices for PMI execution include:

  • co-constructing the new culture with the to-be-acquired company,
  • identifying high potential individuals to keep,
  • list the key PMI goals. It will help you identify when the integration is completed.
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During the due diligence phase, try to meet with top management frequently to get to know each other and establish a good working relationship for building a common PMI plan. - Thibault Monnoyeur, Operating Partner

What aspects of the acquired company should be integrated, such as their brand, technology, or team?

There is no strict answer to this question. It mostly depends on your business strategy.

We recommend to conduct workshops between similar teams and make them deliver a common roadmap (example : acquired marketing x acquiring marketing).

How to track the PMI’s performance/success?

At the beginning of the PMI process, make sure to list the key objectives that you want to achieve through the acquisition. These objectives will serve as the north stars that guide you to track your PMI success.

When is a PMI process over?

It will take more than 10 years to get this answer. However, after completing the key steps of an integration process, it is important to conduct a post-mortem workshop. Ask yourself what worked and what didn't work, and what you would do differently next time.

Additional Resources