The M&A Journey – Marathon or Sprint?

At Devlin Mambo our team has led and successfully delivered complex multi-billion pound M&A initiatives covering numerous products, stakeholders, and platforms.  

Our in-depth understanding of the industry combined with the blend of practical experience across asset management enables us to navigate the complexities associated and to achieve client focussed outcomes. 

Our experienced team share their thoughts on the M&A Journey. Is it a Marathon or sprint?

The Start

The deal is announced and there is an anticipation and excitement about what lies ahead. The integration effort that is to come must surely be a marathon? For those on the inside of the deal though, just getting to the start line will have required some of the hardest sprinting of their working lives. Hours spent trawling due diligence rooms, tense number crunching, clearly documented assumptions based on imperfect information, sifting for material nuances without becoming bogged down in detail. “Better to be roughly right than precisely wrong”. The due diligence is swiftly followed by the planning, the timelines, the costs and the synergies.

All this work is just the pre-requisite that enables one to stand on the start line and explain to shareholders, clients and employees – on both sides of the deal, what it means for them. It is a rarefied atmosphere, there is excitement for sure, but also a smattering of fear and apprehension of what lies ahead. This might hurt!

The First Few Miles

The hype of the start is over, and the race is underway. The early milestones are key, some quick wins to boost morale, demonstrate that plans are on track and the overarching programme looks credible to athletes and emotionally committed spectators alike. Not least of these early milestones will be deal completion with regulatory approval likely the main dependency of this particular “intermediate sprint”.

For leaders this is a challenging period, often needing to balance a number of demands on their time; Doing the “day job” as it existed before the deal, getting to know their new colleagues, contributing positively to the integration effort…and all that of course whilst adapting personally to what the deal means at an individual level. Add to that the need to treat people with dignity and in a straightforward manner. We talk about synergies on spreadsheets but very often of course its people’s livelihoods and this requires compassion and empathy. There is no doubt things can get challenging even in these early miles.

Optimise Running Efficiency

If you have prepared thoroughly in the due diligence phase you will know the “big levers” that have the greatest baring on the financials. It’s not unusual for supplier contracts to have hefty penalty clauses in for example. Other, seemingly modest costs can have significant bearing in the long run though. Take PILON [Payment In Lieu Of Notice] for example. An organisation can save an awful lot of money if up-front, it works through who must work notice and who doesn’t. Aside from the investment desks, where working notice is unlikely, most other roles could work their notice. Now that might not actually sound like a saving as such, but if people are re-tasked to do activities supporting the integration utilising their specific expertise it can represent a massive saving in project costs. Hence a clear articulation on this topic up front, can spare the expenditure of much emotional energy on this topic as the race unfolds.

Spectators?

Clients will be anything but passive spectators in this particular race and they too may experience the full gamut of emotions about the deal. It is quite easy to bake heroic assumptions into the initial business case on the grounds that the new entity will offer clients the “best of both worlds”. Whilst that may have strong basis to some, other clients may well look at the deal as a distraction and thus feel it prudent to at least invoke a review.

Clients of course are dependent on a trilogy of services, performance from the investment teams, robust infrastructure from an operations team, and fronted with familiar faces in the client servicing team. Chances are that any deal will have an impact on at least one of those components and so to many clients, some sort of review may well seem appropriate or indeed necessary to satisfy their fiduciary duties. “Could you wait please I am half-way through a marathon?” is unlikely to wash, for it is you not they that elected to do this. Retaining clients is key, and unless that is the norm, the entire effort of the race can be for nought.

Maintaining a “client centred” integration is more than just rhetoric. At many points on the journey there will be choices between A & B. Human nature will often steer us towards those we are familiar with based on our own legacy experience, but if our litmus test is doing what is in the client’s best interest, we will likely run the most optimal route.

Maintaining Momentum

Quick decision making is fundamental to maintaining momentum. Firstly, be clear on who’s decision it is. Secondly, it is worth noting that many people in analytical roles like to have 100% of the data before making a decision, yet in an integration, especially pre-completion, decision makers may only have 60% of the available data. Leadership is really tested here and having support from people experienced in working in such environments will be beneficial. People need to be encouraged to make decisions based on what they know. Chances are there is enough information to go on and most decisions could be reversed if they really had to be. Thirdly, most companies involved in a deal will likely have at least a couple of hundred systems in play. For only a handful of those will it really matter whether one chooses system A or B. For the rest, a quick decision is preferable to two months of comparative “analysis paralysis”. 

Fatigue

Fatigue on an integration is as natural as fatigue in a marathon. Realistic targets are important and key to motivation. It is one thing to run hard to hit a target but altogether harder if you feel that you are on a team that’s running hard and still not hitting targets. Quick wins, stretching but achievable (and beatable!) targets are key. Nothing kills morale quicker than a leader who asks for 120 in the knowledge he will never get it but might get 100.

Having a bit of fun along the way is also important. Integrations are hard work and require resilience. It’s important for leaders to recognise this and build in a bit of down time to look after staff and of course themselves. In running terms, a few “High Fives” along the way will offer a psychological boost much greater than the delay of that momentary pause in our running stride. 

The Finish

The M&A journey is undoubtedly a challenging one. It’s a marathon for sure but one that is also enlivened with assorted “intermediate sprints” to further test the stamina. But as with the marathon finisher’s medal, the rewards are great for those who have diligently prepared and have the stamina to stay the distance.

If you would like to discuss our M&A Integration experience further, please contact Simba Mamboininga (simba@devlinmambo.com), Catherine Husband (cathy@devlinmambo.com) or your Devlin Mambo relationship contact.