M&A Readiness: A Practical Guide to Testing Readiness through Mock Deals
Are you prepared to restart the acquisition engine?
Companies are now faced with the critical question of their mergers and acquisitions (M&A) readiness, as predictions lean toward a resurgence of M&A activities to pre-pandemic levels in 2024. In the wake of recent years, many businesses have placed their M&A initiatives on hold, leading to a noticeable atrophy in their M&A capabilities. With operations evolving and the departure or role change of M&A experts within companies, there’s a pressing need to rejuvenate these critical skills.
Deals can move quickly. By the time functional leaders are tapped to execute due diligence or integration, there is very little time to get organized. We often hear in postmortem deal reviews that functional leaders want to get involved earlier in the deal. However, that is often not possible because of the confidential nature of the transaction.
Given the significant investments at stake in M&A transactions, there is an opportunity to improve the organizational readiness for M&A by engaging functional leaders and other parties in a mock deal exercise. This exercise should be executed about one to three months before leaders are involved in a real deal.
The essence of mock deals in M&A readiness
A mock deal is designed to simulate the M&A process, involving corporate development, deal sponsors, and key functional leaders responsible for due diligence and integration. This exercise mirrors the real-world scenarios and deals that the company anticipates, providing a hands-on experience for the participants.
A mock deal exercise usually starts with corporate development explaining the inorganic growth strategy and the type of companies in the pipeline. This is followed by a review of past acquisitions’ success and integration friction points. Then participants are tasked with developing due diligence plans based on a mock deal thesis, focusing on deal thesis realization and mitigating operational risks.
Following the due diligence planning, corporate development presents mock findings, prompting participants to plan the integration process. This includes structuring integration workstreams, identifying essential operational metrics, addressing key risks, and acknowledging existing operational challenges within the acquiring company.
The exercise culminates with the integration leaders presenting their plans and discussing potential risk factors, fostering a comprehensive understanding of the integration landscape.
Value beyond preparation
The mock deal exercise transcends mere preparation for upcoming acquisitions. It offers operational leaders a tangible framework to anticipate and navigate the complexities of M&A activities. Simultaneously, it equips corporate development with insights into the operational dimensions of synergy realization, aiding in the formulation of more accurate assumptions regarding synergy timelines and the resources required for integration.
As we stand on the brink of an anticipated surge in M&A activities, the readiness to not just engage but to excel in these strategic moves distinguishes forward-looking companies from the rest. Is your organization poised to harness these growth opportunities? The time to act is now, with mock deal exercises paving the way for a future of successful acquisitions and seamless integrations.
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