An interesting topic was discussed at the NAPEO CFO Conference in the Chicago M&A Roundtable recently that I find fascinating – when preparing for a transaction process, how much internal discovery is best in preparation for external due diligence? The answer is simply…”it depends.” In our view, this is a balance between the following factors:
- Available time
- Insight into the potential buyer’s areas of interest or sensitivity
- Insight into your business’ unique characteristics
Essentially, we are performing the art of strategic planning with a backdrop of the Socratic method. For most people, planning is a challenge. There are hundreds of emails, conference calls and meetings which creates a reactive environment, which directly interferes with this process.
In our work organizing projects that involve strategic planning and preparation, some critical elements appear to be recurring themes of success:
Creativity: It is incredibly useful to take oneself out of the everyday “machine” and ask “what if…?”. These ideas often can reveal a bridge to preparation or presentation of data, methods, value propositions, functional elements, etc. Creativity may be the force to help you think about the priority of items that can be illustrated in various ways within this unique environment.
Brainstorming with your Team: Teams make or break an M&A process. There is a reason our legal system uses the Jury system – a group of minds utilizing the collective wisdom makes better decisions. Put succinctly, a process involving M&A will fail without a highly functioning Team.
Organization: It feels silly to even mention this as it is so obvious. However, since it is so critical it must be mentioned and a special emphasis on the communication of the process within its organized view. The point here is that a common error is that one assumes people are reading and absorbing what we send them. They don’t. Assume that anything above “X” level of importance should be communicated in person, via a specific conversation or some other method where one can truly “engage.”
Judgement and Insight: This is the one that is most critical. Example: How much internal pressure do I put on my organization pre diligence? In the NAPEO Roundtable we discussed this at length. I used an example of client notification of departure to color the choices relative to the balance of available time and depth to which we drive preprocess. As usual, this is situational and where our savvy judgement and insight should guide us. If you think you should dig deeper, then do it! I guarantee any suitor will.
I am tempted to use our 6 P’s to reinforce these points, but feel I would be redundant!
In the end, we should likely look at this like life in general. Let’s make the best decisions on a consistent basis, think through them fully and execute with confidence. Hopefully this will bring quality outcomes. What other choice do we have?