Innovation in M&A — breaking down the walls of the corporate castle

Everything in the world is being disrupted — if not an industry, a big business, a value chain, or your local chippy — you name it, it’s under attack. Quite frankly, I’m surprised the world is still functioning. But what about the corporate world of M&A? For years M&A has been a trusty weapon in a corporate’s arsenal. Traditional strategists would meticulously ponder — who could further strengthen our current offerings? Who has the best product or service I require? How do I expand into a new geography? You get the idea, extremely important, but hardly exponential stuff. Peter Thiel is not exactly quaking in his boots.

What role can innovation play in M&A to create a new type of value creation? Rather than thinking, who do I need to acquire and merge with in a big complicated, commercial fashion — can there be a more creative approach to M&A that results in far greater benefit and less hassle for all involved?

M&A is undeniably big business, Capital IQ calculated that 2015 total deal value reached $3.5 trillion, similar to levels seen back in 2006. Furthermore, 2015 saw 40+ deals surpass the $10 billion mark — with the ABInBev and SAB Miller tie up weighting in at an impressive $105 billion. From the off, market analysts expect significant value to be created, building immediate pressure on teams to demonstrate tangible results. The trouble with M&A deals is that a significant proportion of them fail to create the required enterprise value, typically take 2–3 years of hard slog and require a small army of people to deliver.

I have heard plenty of business and IT executives dismiss innovation in M&A as “something I do not have time for, I have 4 months to integrate 2 core banking platforms” or “now is not the time for innovation, I just need it to work”.

Challenging the above, here are a few ideas to consider:

• Shock and awe. Use the deal as the catalyst to launch a new proposition to drive revenues quickly. Utilise a hotbed of new teams, new ideas, be bold and grab customers imagination to cement the essence of what the new operating company stands for in the marketplace.
• MVI. Minimal viable integration. Big businesses love a good transformation project, so the danger is that everything must be integrated. Pick and choose the elements of both sides to integrate into the new combined company and leave the rest alone. Decide early on the strategic direction for the company and integrate around that — require a world class marketing organisation? Integrate marketing. Need a new product or service? Integrate the product teams. Be selective, do it quickly and realise the value in months rather than years
• Don’t integrate. Leave both companies separate and simply connect through application programme interfaces (APIs) to the core data services to open up the flow of information, knowledge sharing and corporate intelligence
• Throw away the rulebook. Put in place a partnership arrangement with all the necessary components to continually build your own businesses — connect with venture capitalists, proposition designers, start-ups and incubators. Collaborate, build something great and share the wealth

M&A is ripe for disruption, big businesses should take a step back and consider the role it wants to play in the M&A ecosystem, both in terms of the value it can receive and provide to others by doing things differently.