Companies that grow in meaningful ways always take on a highly strategic approach to growth. This is because focus produces results. Lack of focus is like wandering around without any purpose or any clear direction of where you want to go. While you may walk for many miles, you’ll never reach your destination. On the other hand, if you remain on target and stick to the map, you’ll make it to your destination in no time.

In theory this makes sense, but in practice, it can be difficult to say no to what seem like “good” opportunities. But even great opportunities can distract you from your strategy, and by attempting to be a jack of all trades, you’ll be a master of none.

Remaining focused requires a disciplined approach to developing your growth strategy and evaluating opportunities for growth. From time to time, take a step back from the day-to-day operations and reassess your company’s current strategy to determine if it still makes sense. What are your core competencies and how will you build on them? What does your business look like today and what do you want it to look like in the future?

Developing criteria to objectively evaluate growth opportunities can also help keep you on track. When analyzing an opportunity, ask the simple question, “Does this opportunity align with my company’s strategy? How?”

It is important to remember that growth does not always mean getting bigger or adding more business lines; in some cases, it means shedding non-core assets so you can focus on what’s most important. Recently in the news we’ve seen a number of companies adopt this strategy. P&G recently agreed to sell its Lindor brand to Hartmann Group as part of a strategy to sell 105 brands to focus on 10 fast-growing business segments. Conagra has also agreed to sell Wesson oil brand to J.M. Smucker, its private label business to TreeHouse Foods, and has spun off Lamb Weston in order to focus on its strongest consumer brands.

Although it can be hard to say “no,” in the long-term you will be better off. If you pursue too many opportunities, you’ll dilute your efforts and be ineffective. Instead, it’s best to adopt a disciplined and  method to take on a focused, strategic approach to growth.

Photo credit: rawpixel via Flickr, Public domain

The possibilities may be endless, but your resources are not. For many business owners with limited time and money, deciding which ideas to pursue can be a challenge. Here are three ways to prioritize your options for growth:

1. Start with your company vision

The best way to make sure you’re moving in the right direction is to take a step back from all of your ideas and begin by looking at your vision for your company. Who do you want to be as a company? When you have a clear picture of your goal in mind, it will be easier to visualize what steps you need to take in order to achieve it. Without a clear vision you could end up pursuing options that actually drag you in an opposite direction.

2. Use tools to stay objective

While it’s natural to be somewhat subjective, after all business growth is exciting, you don’t want to make decisions based on emotions alone. Try bringing objectivity into your decision-making process by using tools to evaluate and compare your options. When it comes to external, growth, we typically use the Market Criteria Matrix to evaluate the best markets for growth and the Prospect Criteria Matrix to evaluate acquisition prospects. This tool can be adapted to evaluate any opportunity for growth.

Keeping your vision in mind, develop about six key criteria of your ideal opportunity. Next, you develop metrics to quantify the criteria. For example, if one of your goals is to expand your operations to the West Coast, one of your criterion would be location and the metric could be located on the West Coast. Give each option a rating using a 1-10 scale and see how well the options compare to each other and to the criteria you’ve established.

3. Gather data

Making a decision without the proper information can be a big mistake. Conduct research to validate (or invalidate) your assumptions. You don’t have to uncover every granular detail, but it will be helpful to have an understanding of trends and how they will impact your market in the future. One of the best sources of information about the marketplace is your customers. Try identifying the needs and wants of current and future customers. It may even be as simple as conducting a customer survey or asking your sales department for input.

While it can be overwhelming to process through all your options for growth, the good news is that you have many options! Hopefully these three suggestions will help you organize your thoughts as you plan your next steps.

Photo Credit: Bs0u10e0 via Flickr cc

It can be easy to get stuck in the rut and slip into a routine. Far too often leaders stay the course simply because “it’s how we’ve always done things.” However unintentionally maintaining business as usual can be extremely dangerous for the future of your organization. The reality is that as time passes, your markets, customers and competitors change. And your business should adapt to these changes as well.

If you find yourself stuck in the same routine, it may be time to take a step back and reevaluate your strategy. Here are some ways to reinvigorate your business plan.

1. Take a Break

First, dedicate some time away from the day-to-day operations of the business to review your strategy. You may think you’re too busy to do this exercise, but if you want your business to succeed long-term evaluating your strategy is essential. Whether you gather your leadership team for an off-site session, or it’s just an hour you spend thinking about it. Take the time.

2. Use Tools

We use a variety of tools to generate new ideas about growth opportunities. Using tools helps leaders gain a fresh perspective. Helps them see their company from a different lens and truly evaluate the business from an objective standpoint. Some of the tools we use include Porter’s Five Forces Model, The Opportunity Matrix, and the Five Options for Growth.

3. Foster Open Dialogue

From a facilitation standpoint, we use a mixture of individual and group communication to draw out perspectives. Prior to any session we usually interview individual leaders ahead of time. These interviews allow executives to voice their perspectives in a safe space and ensure that everyone’s voice is heard and prevent groupthink. If you don’t have a facilitator, you could ask everyone to answer your questions and write down their thoughts prior to the group meeting. Then, when you move into the group session, you will be able to have a rich and meaningful dialogue because everyone has already has thought about the questions beforehand.

Hopefully these suggestions will inspire you and get you excited about company growth.

Have questions? Let’s Talk! Talk to a senior Capstone advisor at no cost, with no obligation and no sales pressure. We guarantee you will value the conversation. Contact us online or at 703-854-1910.

Microsoft has agreed to acquire LinkedIn for $26.2 billion. This is a massive transaction in the marketplace and is the largest acquisition by Microsoft to-date. At $196 per share, Microsoft will pay a 50% premium over LinkedIn’s closing shares on Friday, June 10. LinkedIn will continue to operate as a separate entity. There is also $725 million breakup fee that LinkedIn must pay if it walks away from the deal so both companies are very motivated to see this transaction close.

Some are saying Microsoft is overpaying, but the high multiple may be justified given the strategic nature of the deal and LinkedIn’s past performance on the stock market.

The Strategic Rationale: Access to Data

Microsoft and LinkedIn have cited a number or reasons for the deal, but the most important one is that the acquisition will give Microsoft access to the data of corporate and business professionals on LinkedIn. This will provide opportunities for cross-selling and developing new products and services for professionals. Eventually these people – you and me – will get marketed to by Microsoft.

Of course, cost savings were also mentioned in the press release as one of the reasons for acquisition. They expect to see savings of $150 million a year by 2018. However, this will not generate growth long-term. What will move the dial is Microsoft’s ability to leverage the data from LinkedIn’s networking platform. Microsoft and LinkedIn will also need to focus on  retaining key talent moving forward.

Finding a Solution to the Growth Challenge

Struggling to grow is not a new challenge for business leaders and it’s a problem that even large, public companies like Microsoft and LinkedIn face. Both corporations have faced difficulties in identifying growth opportunities in the public market. On February 12, 2015 LinkedIn’s share price was $265, but one year later, it dropped to $101 per share. Microsoft has also struggled to revitalize its products and follow technology trends and has faced increased competition from other technology firms like Apple, Facebook, Amazon and Google. It was clear that the status quo was not working and both companies needed to find a new pathway to growth.

The market and your industry are always evolving and you need to be prepared to weather change, whether it’s increased competition, regulatory constraints, disruptive new technology or changes in customer demand. For some that means building a solution from the ground up, but at other times it may mean seeking growth outside your core business or turning to external growth. When faced with a saturated market and stagnation, acquisition may be the fastest way to implement a ready-made solution to generate new growth in and gain a competitive advantage.

Photo Credit: TechStage via Flickr cc

As a leader, it can be difficult to determine the best way to grow your business. Some leaders find themselves stuck in the same rut and struggle to generate new ideas to spur growth. They realize business as usual or what worked 10 years ago will no longer work in today’s market. On the other hand, other leaders have too many, rather than too few new opportunities. With so many exciting options, they may find it difficult to determine which path is best for the company’s future.

Whatever position you may find yourself in, a useful way to explore your opportunities of growth is the 5 Options for Growth Tool. This tool helps you organize the various pathways for growth that are available to your company:

  1. Organic Growth
  2. Minimizing Costs
  3. Exiting the Market
  4. Doing Nothing
  5. External Growth

Each of the pathways listed are valid ways to grow a business. But which one is the right one for you? First, start by listing all of the opportunities that come to mind in each of the categories, no matter how crazy they may seem. Brainstorming in this fashion will help you organize the ideas you already have and help develop new ones. By considering all of the possibilities listed above you can thoroughly explore your options, organize your thoughts and make an informed decision.

Learn more about growing your business in our upcoming webinar “5 Options for Growth” on January 21. CPE credit is available.

5 Options for Growth Webinar
Date: Thursday, January 21, 2016
Time: 1:00 PM ET

Photo credit: Barn Images via cc

Instead of investing in growth, companies this year have been holding more than $1.4 trillion in cash – close to a record $1.65 trillion in 2014. Oracle’s $56 billion cash stockpile is 1.5 times its sales and Cisco’s $60 billion in cash is 1.2 times its sales. Eleven companies have cash reserves double their annual revenue.

And it’s not just Fortune 500 companies. According to the Middle Market Center, more middle market firms plan to hold onto cash in 2016. Fewer of them are willing to invest extra money or plan to expand in 2016.

Have U.S. Companies Stopped Investing In Growth?

Companies that stockpile cash don’t invest in stock buybacks and dividends, research and development, other organic growth initiatives or mergers and acquisitions.  A strong balance sheet is important, but the levels of cash held by nonfinancial S&P 500 companies is astounding!  They may be worried about the economy or the upcoming elections. But there’s another possibility: all that money on the sidelines portends robust M&A activity in 2016.

Tax Savings

Publicly traded companies also are stashing profits offshore to avoid paying taxes on them. The U.S. corporate tax rate is one of the highest in the world and tax inversions in particular are being driven by the pursuit of tax savings rather than for strategic reasons. .

The latest example is Pfizer and Allergan’s proposed merger which would relocate the company to Ireland and away from the U.S. corporate tax rate. Other companies that have done this include Chiquita, Perrigo, Medtronic, Endo, and Actavis despite calls for stronger restrictions on tax inversions by Congress and President Obama. Pfizer already has found ways to save on taxes even without the acquisition. The company has designated $74 billion as “indefinitely’ invested abroad.

Invest in Growth Now

As other companies hold onto cash, you have a unique opportunity now to invest in your future. Do this by developing a long-term strategic plan, investing in new products, services or equipment, or growing organically. Or pursue the faster, more powerful vehicle of strategic mergers and acquisitions. Middle market companies can seek privately held, not-for-sale deals that focus on long-term growth rather than on cost savings or short-term quarterly updates with shareholders. This increases the likelihood of a successful transaction and sustainable growth.

Middle market companies cannot afford to dwell on cost savings and sit idle. Make sure you are thinking about long-term growth and how your company will not only survive, but thrive.

Is your company hoarding too much cash? Or are you investing in future growth?

Photo Credit: Pictures of Money via Flickr cc

Expedia will buy HomeAway, a vacation rental site, for $3.9 billion. With this acquisition — its largest since buying Orbitz in 2014 for $1.3 billion — Expedia will compete more directly with Airbnb.

Airbnb, through which people rent their homes to travelers, has become more popular in recent years, both with consumers looking for a cheap place to stay and with those seeking to make some extra cash. Airbnb is expecting its bookings to double to 80 million nights in 2015. HomeAway offers a comparable service. Although Expedia is online’s largest travel agency by bookings with 150 million bookings in 2014, it expects the growing demand for alternative accommodations to continue and possibly to cannibalize the hotel industry.

Build on Your Success

What can the middle market player learn from this deal? If, like Expedia, your business is successful or even the market leader, don’t get too comfortable. Success can easily slip away with disruptions in the market, changes in consumer demand, and new competitors. My point is that if you’re not growing, you’re dying – even if you don’t realize it.

Now is always the best time to build on your success and strengthen your position. You should proactively explore and evaluate all your growth options rather than wait until you are backed into a corner or feel pressured into hasty decision-making.

In addition, although acquisition is usually much faster than building a solution from the ground up, it still takes time to execute successfully. The entire process of crafting an acquisition strategy, finding the ideal markets and prospects, negotiating the deal, and finally signing on the dotted line typically takes about one year.

The first step to take now is to observe your market environment and customers. What do your customers want today? What will they want in the future? Think about meeting the needs of both current customers and customers you have yet to capture. You may decide to stay on your current path. Or you may find that you want to enter into a new market. Either decision is fine, but it should be made deliberately.

Photo Credit: Michael Coghlan via Flickr cc

Most companies are seeking growth outside of their core business through organic means or mergers and acquisitions, according to a new survey by McKinsey.

What’s interesting is that although many companies want to expand beyond their mainstay business, most do not have the capabilities to do so. Here are three best practice steps noted for successfully growing in new categories:

  1. Scanning for expansion opportunities
  2. Evaluating expansion opportunities
  3. Integrating new activities into core business

By following these best practices, companies are two times as likely to be successful; however, McKinsey reports that only between 27% and 33% of those that they surveyed did so.

When it comes to exploring new opportunities, business leaders are often too caught up in day-to-day activities to think about the bigger picture. Many are overly concerned with their competitors or simply are at a loss when it comes to generating new ideas for growth. This also means that once an opportunity is identified, it’s often the only one considered – so of course, the company has trouble properly evaluating the single opportunity and determining whether it is a good fit. And if an opportunity is not the right fit, there will be difficulties in integrating it into the core business.

If you find yourself in a similar situation, or simply wish to improve your capabilities, here’s some advice to help with your growth efforts.

  • Start with strategy – It should go without saying, but strategy is key to success. The survey emphasized the importance of having a clear, long-term strategy: “When executives say their companies have a clear strategy for expanding into new activities, for example, they are four times more likely than those whose companies have no such strategy to report significant value creation.”
  • Consider all your growth options – Did you know there are FIVE options for growth? They are: organic, external, minimize costs, exit, and do nothing. While you may be leaning toward one of these pathways, it’s best to consider it in the context of the others. This gives you a chance to seriously evaluate all of possibilities and provides a more complete picture. By considering all five options, you will either gain confidence about the decision you’ve already made or uncover a new path for growth.
  • Use tools to generate ideas – We use tools like the Adjacency Map and the Opportunity Matrix to generate, organize and evaluate new opportunities. We find that a brainstorming session using these tools gets the ideas flowing. No idea should be off the table, no matter how remote or crazy it may seem.
  • Evaluate opportunities with criteria – Develop criteria that match your ideal opportunity. Which aspects are most important to you? Market size, demographics, technological capabilities or something else? For example, if your overall strategy is to expand into Latin America, location is clearly important. Those opportunities that allow you to expand south of the border will be evaluated more favorably that those that don’t. Once your criteria are established, compare all options against the same criteria. This will help you remain objective and strategic.
  • Develop an action plan – You need a clear plan for executing and integrating the newly acquired business (or new product or capability) with the rest of your current business. For M&A, especially, integration is the number one reason for failure – so start planning early. Your plan should, of course, be guided by your long-term growth strategy.

If you’d like to continue exploring your options for growth, download your free copy of “Finding Opportunities for Growth: The Opportunity Matrix.”

 

When thinking about the best market for acquisition, many tend to focus on the market (or markets) in which they already operate.

People feel very confident about what they know, for good reason– experience, past success, existing relationships, etc., but sometimes focusing on only one market means your perspective is myopic.

There is little harm, other than perhaps some time and money, in exploring adjacent markets. Taking a look at neighboring markets can validate your assumptions and give you confidence to move from planning to action.

The worst case scenario would be that researching adjacent markets yields no new information and you’ve wasted your time. However, in my over twenty years of experience, clients have always gained some new and different insight from considering adjacencies. They have never walked away empty-handed.

Most likely you will find new opportunities for acquisition or even for organic growth. I encourage you to open your business to innovation by exploring adjacent markets.

“We have a strong vision and a clear plan for growing the company in the future,” Sarah, the CEO, told me with complete confidence during a recent strategy session.

Her CFO disagreed: “We have no vision.”

Various members of her executive team shared similar sentiments privately with my team and me. Many expressed anxiety; they had no idea where the company was headed.

So what had happened? How could the CEO be 100 percent confident while her team was plagued by doubts?

This scenario where the CEO has one vision in mind while others within the company have another is a classic example of a disconnect between leaders and their teams. The worst part of the misalignment is that the CEO thinks everyone is in agreement.

Differing perspectives about a company’s future can arise because:

  •  The vision has not been communicated clearly – Perhaps it was a simple communication issue. Either Sarah had not fully described her vision or the team was having difficulty understanding what she had told them. This could be solved by restating the vision and answering questions about the company’s future.
  • Disagreement over the vision – On the other hand, maybe Sarah did share her vision, but her executives disagreed with her on the direction of the company. In this case, it would be helpful to have an open dialogue about why people disagree. Perhaps Sarah was a visionary with a great idea that the executives couldn’t quite grasp yet. Or, perhaps she was too wrapped up in her own perspective and was missing warning signs that the executives could clearly see.
  • There is no vision – Sometimes, a CEO does not actually have a clear vision to lead the company forward, even if they think they do. Sarah’s ideas may not be fully developed, or her perspective may be unrealistic given the current market. In this scenario, the first step would be for Sarah to acknowledge the problem and work with her executive team to develop a strong vision for the company.

In this case, Sarah did have a vision but had failed to communicate it clearly to the rest of the team. And, most of the executive and management team was afraid to express their concerns with her. This is understandable. It can be intimidating to disagree with your boss! During the strategy session, we used our role as third-party advisors, and some proprietary tools, to facilitate a dialogue that clarified and deepened everyone’s understanding of the company’s vision.

Having these conversations is necessary for successful strategic growth. You can’t be successful if half of your team is lost or confused. If you find yourself in this situation, I encourage you to foster a dialogue with your team. Try an internal strategy meeting, writing down your vision statement and creating a culture where people can speak openly with you.

Because people can be hesitant to be honest with you, sometimes you might need to use an anonymous survey to get feedback.  Or to break through the communication barrier, you can host a strategy session facilitated by an outside third party, like the one we had with Sarah and her team.

Remember as the CEO or president you’re not single-handedly taking the company into the future. While you might be the leader, it takes a team to help a company grow and execute a strategy. Make sure everyone on your team is following the same path.

I am excited to announce a new resource we’re launching on March 5: M&A Express.

M&A Express is a series of high-impact videocasts that teach the essentials of M&A success in 20 minutes or less. Each videocast will cover one key aspect of growth through acquisitions.

After every videocast, I will be present for a live question-and-answer session.

If you’ve attended my recent webinars may have heard me mention this concept of short, educational videocasts on M&A. My team and I have been hard at work since last year to bring you this fresh, deep-dive exploration of various M&A topics.

David Braun Filming the videocasts for M&A Express last fall

Filming the videocasts for M&A Express last fall. Photo Source: @AndyRenk

M&A Express will be presented by Capstone as a FREE service to middle market owners and executives.

To find out more about registration, visit the M&A Express webpage here.

I will also be posing the schedule of upcoming videocasts here on my blog, so make sure to subscribe.

Are you unusually busy? If you’re like most people the answer is yes! With the holiday season upon us, we are most of us inundated with commitments to work, family and friends.

While it might be easy to get caught up in the bustle of the season, I recommend pausing to plan your growth path for the New Year if you haven’t already done so.

Envision the big picture first. What are your long-term growth goals? We always encourage our clients to think about their dreams. Don’t be afraid to dream big for your company. Once you’ve defined the vision, you can break it down into manageable pieces such as specific goals for 2015 or goals for the next five years.

Plan out actionable items — initiatives you will undertake to accomplish each goal — and then identify and assemble the necessary resources. Each initiative should bring you one step closer to your growth objectives. You don’t have to have all the answers right now, and your plans may change, but this will help you stay focused and organized next year.

Of course, you may be well ahead of the curve with your strategic planning. But in case you haven’t begun planning for 2015, now is your chance to think about your next stage of growth before 2014 comes to a close.

Have a question about leadership and strategic planning? Contact us today.

Next year will be a strong one for strategic acquirers. A KPMG survey reports 82% of executives expect to execute at least one acquisition in 2015, up from 63% in 2014. This is consistent with what Capstone has been seeing in the marketplace. Our survey of midmarket executives earlier in 2014 revealed that, 60% of midmarket executives reported M&A activity in 2014 and 44% already plan to execute an acquisition in 2015.

2015 Mergers and Acquisitions

Expect robust M&A activity in 2015. Click on the infographic for a closer look.

Large cash reserves, low interest rates and consumer confidence are key drivers behind M&A activity. U.S. corporations held a record $1.65 trillion in cash in mid-2014 and have finally begun spending their war chest on stock buybacks and M&A. The study anticipates large deals valued at $250 million, $500 million and $1 billion.

“Buyers are paying a premium for targets that will allow them to realize long-term strategic goals and gain an advantage over the competition,” says Dan Tiemann of KPMG.

This is good news. For too long after the recession, corporate America has been afraid to take risks. Many companies have remained on the sidelines and others have focused on acquisitions driven by cost-cutting to increase profits rather than on a sustainable strategy.

We have long encouraged clients to pursue targets that most closely support their long-term growth, including not-for-sale acquisitions. This may mean paying a little bit more upfront to execute an acquisition that will grow your business exponentially. Strategic acquirers do not qualify “good deals” on price alone. They understand the cheapest or the easiest deals do not necessarily meet their needs. Instead, they are looking for the company that will best serve their growth objectives.

Strategic acquisitions allow you to accelerate your growth and open up many opportunities that are unavailable through organic means alone. I am encouraged that more companies are thinking about long-term strategic growth—and I hope you are, too!

Have you considered all your options for growth?

I have found that some leaders are limiting their potential for company growth because they fail to examine all the possible ways to achieve it.

Some are stuck in copycat mode, constantly mimicking the strategies of their competitors and playing catch-up. Others struggle to come up with new ideas. Even leaders of companies that are growing may be missing out on key opportunities.

Five key options to consider when it comes to company growth are organic growth, minimizing costs, external growth, exiting the market and doing nothing.

Even if you think you know which option is best, I recommend you consider them all to create a complete picture of the possibilities that lie before you. This equips you to make an informed decision about the best way to grow your company.

Capstone will be exploring the five options for growth in our upcoming webinar on December 11.

You will learn to:

  • Define the five growth options as they apply to your company
  • Understand why external growth (acquisitions, joint ventures, etc.) can be the best option for your company
  • Gauge the current state of the M&A market using relevant statistics and indicators
  • Begin to develop a step-by-step M&A process for your company

Don’t let opportunities pass you by. Learn how to best position your company for success by joining us for this foundational webinar.

Date:  Thursday, December 11, 2014
Time:  1:00 PM ET
CPE Credit available.

Register: http://attendee.gotowebinar.com/register/3419240731938664450

Research indicates that up to 70% of mergers and acquisitions fail to meet stated objectives, and of those 50% will destroy shareholder value. Those are daunting statistics. Yet acquisitions remain a top means for growth in companies in the U.S. and around the world. So a key question for any organization looking at M&A as a growth strategy is how to mitigate the risk associated with acquiring a new company and marrying their employees to yours?

Key Drivers of M&A Failure and a New Focus Area

While 2014 has seen increased M&A activity, the reason that many deals fail isn’t due to the hard financial data. A deal’s success absolutely hinges on the human factor—otherwise known as the “soft skills.”

Some observers considering “soft skills” focus primarily on workplace culture as the driving factor for reducing M&A risk. While culture clearly is important, I believe the foundational issue in M&A failure is leadership (or lack thereof). I say this because the competitive advantages that companies may possess in areas such as manufacturing, R&D, or marketing are squandered if a best-in-class leadership is not in place to leverage these capabilities for increased growth and financial prosperity.

The Research – Leadership Skills Needed for M&A Success

This perspective that leadership is a foundational component of M&A success is not just a hunch. I recently quantified the impact of leadership on M&A success in my doctoral research at the University of Pennsylvania in a unique joint program between the Wharton business school and the Graduate School of Education. My research identified the specific leadership skills needed for successful mergers and acquisitions. The outcomes of this work were highlighted in the article “The Leaders That Make M&A Work” in the September 2014 issue of Harvard Business Review.

My goal was to understand the role of the collective leadership capabilities of acquirer and target companies as a predictor of M&A success. Mergers and acquisitions represent major change events for both the acquirer and the target, and successful change efforts are driven by the leadership of both organizations. With this understanding as a foundation, I addressed two critical questions:

[list3]

  1. What leadership skills predict M&A success for acquirer and target companies?
  2. Do senior executives or middle management have a greater effect on M&A success?

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My research revealed a new understanding that specific leadership skills predict M&A success for the acquirer and target. And while there are similarities between the two M&A leadership frameworks, there is variation as noted in the table below.

M&A Leadership Risk Profile

Acquirer/Target Leadership Skills that Predict M&A Success

Finding the Right People

The second question I hoped to answer, about whether senior executives or middle managers have a greater effect on M&A success, offered intriguing results. As expected, senior executives have a greater impact on M&A success for acquirers. However, I was most surprised to learn that for targets, the greater effect comes from middle managers. These findings suggest acquirers may want to focus their attention on middle managers in addition to senior executives when considering who to keep within the new organization post-deal.

Impact of Leadership Capability on Growth

With respect to growth, companies that possessed the correct M&A leadership capabilities as either the acquirer or target achieved significantly greater growth two years after the deal finalization than those without the profile.

What does this mean for you? Simply put, focusing on leadership capabilities will greatly contribute to the success of your acquisition. Take a look at your own company as well as the target company and identify the right leaders with the right leadership skills. This will give you a proven competitive advantage in your acquisition and will prevent you from being part of the 70% failure rate.

It’s that simple.

*This post was written by Dr. J. Keith Dunbar, Founder & CEO of Potentious.

About the Author

Dr. J. Keith Dunbar established Potentious to provide a forward-thinking consulting service to senior executives and corporate M&A teams to minimize the risk of and maximize the probability of successful decisions that meet financial outcomes. Leveraging groundbreaking research on the role of collective leadership capability in successful M&As, his unique method transforms due diligence, by providing a means to mitigate the risks that otherwise limit or cancel out the potential to meet financial growth targets associated with the M&A.

Dr. Dunbar serves as Director of Talent Management at Leidos, supporting more than 23,000 employees. Prior to this role, he was Director of the Leadership Academy and Global Learning Solutions Group with the Defense Intelligence Agency. Dr. Dunbar retired from the U.S. Navy in 2006 after a celebrated 21-year career in naval intelligence. He received his Doctorate of Education from the University of Pennsylvania in 2013.

 

About Potentious

Potentious® is a boutique mergers & acquisitions consulting firm specializing in the identification of the leadership capabilities in companies that lead to successful M&As. The Potentious M&A Leadership Risk Profile™ methodology evaluates the collective leadership capability of the acquirer and target companies to quantify the level of risk in a particular M&A. To learn more, visit www.potentious.com.

At first glance you may ask, “Why in the world would Warren Buffett buy Duracell?”

One explanation is financial. Through a bit of fiscal engineering Berkshire Hathaway is able to avoid triggering significant taxes. The Duracell transaction, is essentially a merger through a stock swap. Berkshire will give P&G $4.7 billion of the shares it now owns and P&G will infuse $1.8 billion in cash into Duracell before the deal closes in 2015, Reuters reports.

The financial aspect aside, it is puzzling why Warren Buffet wants to acquire Duracell. The battery industry is a fairly mature market. What more can he do?

We may be tempted to think “mature” equals “boring,” but there is still room for creativity. The Duracell transaction is just one example.

Last month, Berkshire Hathaway acquired Van Tuyl Group, an $8 billion automotive dealership. Again, this is a mature industry. The reality is that Berkshire Hathaway sees this acquisition as an opportunity to consolidate and to add what we call “optionality.”

Now, not only will Berkshire Hathaway sell you a car, they may offer a preferred rate at Geico insurance, an after-market warranty package and even financing. By acquiring these businesses, Warren Buffett is able to bundle and sell more things under the family of Berkshire Hathaway.

Even if you are in a mature market, I challenge you to creatively look for growth opportunities.

Entrepreneurs rarely face the challenge of having too few ideas. In fact, like most entrepreneurs and business leaders you probably have a multitude of great ideas for growing your own business.

Your biggest challenge may be figuring out which of all the alternatives is the best way to get from where you are now to where you want to be.

We recommend using a systematic process to sort through all your ideas and create an action plan. Here are some steps in that process:

1. Think about your vision.

Where do you want your company to be in a year and in ten years?  All your initiatives should help you move toward this goal. If an idea isn’t helping you achieve your vision, then maybe you shouldn’t spend time on it.

2. Prioritize your ideas.

While all your ideas may seem wonderful, upon closer inspection you’ll likely find that some are more worthwhile than others. For example, if you envision taking your business national in the next five years, you may rate ideas that help expand your geographical presence more highly than those that do not. Use tools such as the Opportunity Matrix or Weighted Criteria or even a simple pro-con list to help you objectively sort through the possibilities and organize your thoughts. These tools will also give you the confidence that you are selecting the best and most important ideas for growing your business.

3. Get focused.

Without clear focus it’s difficult to move forward. If you’re all over the map, you won’t apply the time and resources needed to grow. Rather than diluting your efforts develop a plan focused on one goal and concentrate mostly on that. You can always modify your plan as time passes and your goals change.

4. Execute your plan.

As Nike puts it, “Just do it!” There comes a time when you need to move from thought to action. If you’ve done the upfront work on planning your growth strategy, don’t be afraid to pull the trigger.

By following these steps you’ll identify the ideas that will help you create a pathway for growth.

How do you find the best market for your product or service?

Capstone Project Manager Matt Craft answered this important question on the Market Selection Panel at the Virginia Conference on World Trade in Richmond, Virginia on October 30.

Hosted by the Virginia Economic Development Partnership (VEDP), this is the state’s largest international trade conference and is focused on expanding international business with participating representatives from the Middle East, Australia, Canada, Brazil and Mexico. The 250 businessmen and women who attended and heard Matt came from various industries that included engineering, manufacturing, professional services and IT.

Matt discussed how to go about selecting the right market and the importance of using tools for prioritization and good decision-making. As a critical step in following future demand, selecting the right market begins with thinking about which customers you want to reach and what markets they will be in.

Market selection isn’t always about geography, Matt explained, but could also mean deciding between vertical markets such as healthcare, retail, or industrial products. The idea is to select a market where you see a growing demand for your business’s services or products. By entering a growing market you can position your company for long-term growth.

In more than ten years as a Virginia Leaders in Export Trade (VALET) Program Partner, Capstone has advised many companies on the market selection process.

Learn more! Free special report:  “Markets First – M&A the New Way.”

With a 70% failure rate for acquisitions, it seems like the odds are against you from the beginning. Before you get scared off, however, let’s take a closer look at what that 70% means.

The 70% failure rate is mainly based on large, publicly traded transactions because large transactions must be reported to the SEC, and information on public companies is generally available. In addition, these large transactions tend to make the news more often since people are fascinated by massive deals involving well-known brands.

Despite this focus on large acquisitions, there are hundreds of smaller, unreported transactions involving middle-market companies and privately held businesses.

We call these types of deals “taking small bites of the apple.” Instead of huge, transformative deals, which tend to be a bit difficult to swallow, smaller, strategic acquisitions achieve a higher rate of success.

Acquisitions are a powerful tool for sparking growth and may be the only way for you to reach your goals. Acquiring smaller companies does not completely eliminate your risk, but conducting multiple, smaller acquisitions, enables you to take manageable steps to executing your growth strategy.

As with any business initiative, you must take some risk to reap the rewards. Following a carefully planned strategy and a proven process will help minimize your risk and optimize the success of your acquisition.

John Dearing, Capstone’s managing director, presented a webinar on “How to Grow Your Business: Mergers and Acquisitions” on September 24 to a group of Bucknell students and alumni.

Recognizing a rising interest in business growth and mergers and acquisitions, Bucknell Alumni Career Services invited John, a 1991 graduate, to share his expertise with his fellow Bucknellians. His webinar covered the M&A process as well as best practices, strategies and tools to help with executing acquisitions. John also urged developing a strategy and vision before executing acquisitions to increase the likelihood of success.

For those interested in company growth and M&A, this new webinar will serve as a resource to further their education.

To view the webinar, please click here.