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Strategy & Legacy Planning In The Context Of M&A Transactions

Growth is always top of mind for any business and mergers or acquisitions are certainly one way to achieve it. Strategic decisions like this can give companies access to new markets, resources, and other competitive advantages. In fact, according to data gathered, the projected growth of M&As in the U.S. is forecasted to reach $1.09 trillion in 2024.

However, finding and negotiating the right deal isn’t enough. Strategic planning and long-term legacy are both key to ensuring the transaction goes smoothly and that it results in a positive future outcome. In this blog, we’ll take a deeper look at how strategic legacy planning can guide your M&A transaction and ensure it leads to lasting value.

Creating A Clear Vision For Your Future: What’s Your M&A Strategy?

Before you take the steps to execute a merger or acquisition, it’s important that your leadership team is aligned on the strategy and desired outcome. Doing so will help you identify and filter target companies that fit the vision you have for your legacy plan. Does the target company have complementary values? Do they have access to markets you want to grow in?

Knowing and agreeing on what you want will help your leadership team select an M&A transaction that’s the best fit.

How To Craft A Powerful Vision As A Leadership Team

While you may already have a vision statement, now is the time to revisit it and craft one specific to this undertaking. Make sure that what you have aligns with what you’re trying to accomplish through an M&A deal. 

A simple framework for drafting your vision is to:

1. Start with your core values. What are those key values that guide and drive your business?
2. Define what you want to achieve. Do you want to innovate more? Serve new clientele? Advance your talent pool? Achieve a new revenue goal?
3. Envision what success looks like to you. After you find the right company and complete the deal, what legacy do you want to create?

“When your leadership is in agreement on all three areas, you can craft a well-defined vision that will enable you to achieve strategic innovation. In turn, this will create a clear roadmap that can help increase your chances of a value-generating transaction.”

— Maxwell Heller, Managing Director

Identifying Smart Targets: Leverage Your Vision

What are smart targets in business? In the context of M&A strategy, it’s simply the company you choose to acquire or merge with on the basis that they’re a good fit with your legacy goals and vision.

Here are some different considerations of what makes for a ‘smart’ target. Select your targets from the criteria that matter most to you.

• Financial Positioning
  • Valuation: the target is a fair price and offers a good ROI for your company.
  • Financial standing: the target has a healthy cash flow and minimal debt.

• Growth Potential
  • Market share: the target is strongly positioned in its market(s) or has the potential to be a game changer.
  • Disruptor: the target is set up for future developments or rapid growth in a disruptive sector.

• Organizational Business Structure
  • Regulations: the target’s regulatory environment won’t delay or impede the M&A.
  • Integration: the target’s operations, systems, and culture will be a logical next step to combine with your own.

• Values
  • Family: the target is an heir or legacy member (child, grandchild, niece, nephew, etc.) who is a good fit and poised to take the business over.
  • External Target: the target company’s family or leadership principles guiding the business are aligned and a good fit yours.

Examples Of Smart Targets In Action

Below we’ll look at two high-profile M&A transactions where the companies each leveraged a clear vision to identify their smart targets and find a deal that created value. Use these examples as inspiration to help you as you consider what transaction has the best potential.

Microsoft Acquiring LinkedIn

With Microsoft’s mission of “empowering people and organizations,” their choice to acquire LinkedIn in 2016 feels like a natural fit. They saw the value the social network was gaining and also recognized that it served their two target audiences: professionals and organizations.

The deal enabled them to integrate their productivity tools with LinkedIn and also enhanced the ability for professionals to connect within Microsoft products.

The result? Microsoft became more attractive to clients wanting productivity and professional networking tools. It also helped increase engagement with products like Outlook and LinkedIn.

Disney Acquiring Marvel
Another visible and successful deal was the combining of Disney and Marvel in 2009. Disney’s vision of expanding its storytelling universe was a fit with the large library of characters Marvel brings to the table.

The deal brought a new library of content and a new audience within reach of Disney, ultimately allowing them to expand their reach and appeal. On the other side, Marvel had the resources of Disney available to help them produce more, high-quality content. 

The result? While there are no exact numbers released, Disney has confirmed that they’ve had around a $25 billion-plus return from their acquisitions of Marvel and later Star Wars.

Navigating Integration Challenges: The Legacy Impact

Combining two organizations is bound to come with friction, even if they are a fit strategically. There will still be organizational and cultural hurdles you should be prepared to overcome.

Some common challenges associated with M&A transactions can include:

• Employee morale and retention
• Operational disruptions
• Loss of customers or clients
• Hidden liabilities
• Unexpected costs of integration
• Difficulty aligning management teams
• Regulatory challenges

While knowing what you want the legacy of the transaction to be won’t fix these issues — it can help encourage everyone to unite and solve them. 

In fact, how you position the changes can actually help you overcome them. We recommend considering change management as a piece of your post-transaction approach.

Change management professionals are experts at helping employees navigate tough transitions and reduce human resource issues. They’ll be able to anticipate areas where people are resistant, help address those concerns in a way that hears everyone involved, and then foster clear communication between leadership and employees. 

Through this process, change management will help everyone involved see that compelling vision of the future and their role in achieving that legacy plan. This will help everyone adapt to the ‘new normal’ more quickly and minimize the chaos.

Creating Lasting Value: The Legacy Beyond The Deal

Ultimately as you begin to navigate your M&A strategy and beyond, remember that success is about more than just financial gains, although those are certainly important too. Your deal can create lasting value that impacts your organization’s legacy. Those value adds can include:

• Enhanced innovation capabilities
• Expanded market reach and impact
• Diversified workforce
• Better financial performance
• Strengthened industry influence
• Improved brand recognition

All of those are worth achieving and can be a big support in securing the longevity of your business. That said, taking the steps to do legacy planning and undergo an M&A transaction from start to finish can be complex.

If you’re in unfamiliar territory, find the expertise you need on demand from Centri. Our experts are well-versed in helping organizations of all sizes undergo high-value deals. We can also provide support after your M&A, with a wide range of accounting and advisory services designed to help your organization at any stage of the business lifecycle.

Ready to grow your business and build a legacy that lasts?

Maxwell B. Heller

Managing Director | M&A Advisory Practice Leader

Max is a Managing Director at Centri Business Consulting and the leader of the firm’s M&A Advisory Practice. He has more than 20 years of merger and acquisition consulting experience and provides M&A advisory services to private equity firms, venture capital firms, family offices, and strategic/corporate clients. View Maxwell B. Heller's Full Bio