Post Merger Innovation - don't just Integrate, Innovate!

Toby Tester

In this webinar, learn the importance of innovation in M&A, specifically during integration. Toby Tester shares tactics and strategies you can apply to your own practice and breaks down how to adjust plays to fit the specific needs of each deal.

Jeff Desroches
VP of Corporate Development at Atlas Copco
Ivan Golubic
Former VP Corporate Development at Goodyear
Erik Levy
Group Head Corp Dev and M&A at DMGT PLC
Kison Patel
CEO at DealRoom

Post Merger Innovation - don't just Integrate, Innovate!

15 Jun
Toby Tester
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Post Merger Innovation - don't just Integrate, Innovate!

Post Merger Innovation - don't just Integrate, Innovate!

“The transactional approach to M&A will not deliver transformational results. There has to be a mindset change.”

M&A as a means of transforming your business

We are recapping a session from the M&A Science Virtual Summit held in June 2020. In this interview, Kison discusses post merger innovation. Joining him to talk about this topic is Toby Tester, Senior Consultant and Project Manager at BTD. Together they discuss how you can use M&A as a means of transforming your business, the traditional M&A approach versus an Agile approach, and the benefits of testing out the Agile approach.

Additionally, you will learn about the Holy Trinity of M&A success, the difference between game plans and plays, how to use a SWOT analysis as a play, and developing an operating model for plays. They close out the session with an interesting take on theatrical versus cultural approaches to M&A and give tips on how you can make your M&A process more innovative to drive better outcomes.

special guests

Toby Tester
Senior Consultant & Project Manager at BTD

special guests

Toby Tester
Senior Consultant & Project Manager at BTD

Hosted by

Kison Patel

Episode Transcript

Perhaps you know the feeling: that sinking feeling after a deal is done that more could have been accomplished - more value extracted, more thoughtful examination of the intricacies of the deal, more forward, original thinking applied.

It is not uncommon for practitioners to feel this way after integration, so how do you take that extra step from traditional M&A to transformational, innovative M&A?

Today, we use insights from twenty plus year practitioner and innovative thinker Toby Tester to unlock practical ways to not just integrate, but rather to innovate. 

1. Shift from value capture and short term thinking to value creation and long term thinking

Historically, deals follow a transactional approach that centers around value capture (essentially short term thinking). In fact, for the last twenty years, most deals have focused almost exclusively on cost synergies. A mindset shift is needed here, and we have seen the beginnings of this shift in the last couple of years.

Specifically, the shift needs to be toward transformational thinking that is built upon value creation and long term thinking and planning. This means behaviors must also change - how we do business. Practically, this means not only focusing on cost synergies, but also on the less predictable revenue synergies and taking thoughtful, small risks.

It also means becoming more Agile, which we will further explore below. The good news is In 2019, it is reported 60% of deals were focussed on broader scopes so M&A practices are moving in the right direction. 

2. Introduce Agile approaches thoughtfully and methodically

As previously mentioned, transformational thinking goes hand in hand with being more Agile. The best way to introduce an Agile approach is to have a hybrid of traditional practices and Agile practices. This helps with buy-in as leadership presents Agile to employees.

For example, traditional practices tend to work well with functional integration because functional integration is deterministic, while working to capture revenue synergies is characterized by uncertainty so this is where an Agile approach is useful. Similarly, if you are looking at things such as profit levels and product changes, Agile practices are also very useful.

Overall, Agile works well in short term learning cycles; it is a powerful way to see and capture value opportunities. Again, when moving to a more Agile way of thinking and working, it is critical to have the support of senior executives; you need leadership and coaching to promote Agile as taking little steps towards Agile can generate buy-in. 

3. Structure teams appropriately

Innovation and agility are both enhanced when teams are structured appropriately. The best way to structure your teams is to have a cross- functional approach aligned with key drivers because by nature M&A is cross- functional. Simply put, it just makes good business sense to align teams based on major drivers such as product, etc.

How does this enhance agility?

Well, this approach lends itself well to working for revenue synergies, which again should be done in a more Agile manner.  

4. Embrace plays as the most powerful way to create business breakthroughs

As we know, every transaction is unique in terms of culture, people, and challenges - this fact is what makes work in M&A so exciting. It also is what makes playbooks fail despite practitioners and companies often wanting to rely on them. To truly innovate, you must replace playbooks with individual plays.

A play is essentially a way of making observations and coming up with new ideas and plans for delivering value; you can think of it as a structured conversation with the play encapsulating a tool or technique with a script that goes with it. The script provides a rundown of who uses the play, how long it takes to run, how difficult it is to run, the process steps involved, and finally, the outcomes.

While plays can include templates in their scripts, they are more powerful than templates alone because they are more comprehensive. The best way to leverage plays is in an a la carte manner based on the unique characteristics of your deal; the plays you run will allow you to gain powerful insights that lead to transformation.

Examples of plays include:

  • developing a SWOT (an easier play to run), d
  • developing an operating model (a more difficult play to run),
  • and creating innovation insights, which allows you to gain capability insights and focus on what separates you from the competition (more difficult to run).

There is a play for every scenario, and they are highly interactive… and when you think about it, this is very wise since they allow individuals within an organization to feel comfortable providing input and sharing ideas - the perfect environment for innovation to come to life. 

Final Thoughts

In summary, M&A practitioners must become more innovative and Agile.  Plays are innovative ways of creating business breakthroughs and, consequently, deal value. M&A plays leverage both the left and rights sides of the brain and give people permission to share ideas and think long term.

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