Deal value mindset: Priming your organisation to make the most of digital

By Sarah Moore, Deals People Partner


By Sarah Moore, Deals People Partner and Natalie Nash, Director, PwC

Businesses are looking at acquisitions to bring in the creative talent and innovative technological capabilities that will enable them to compete in markets facing disruption and change. Yet the value potential can easily be lost through a lack of organisational understanding about what’s been acquired and purchased and why, or an unwillingness to make the necessary shifts in mindset, operations and talent management. So how can your business ensure it is ready?

We’ve known for some time that deals that enhance technological capabilities produce superior returns. While synergy and scale remain key deal drivers, the search for game-changing capabilities continues to gather pace as businesses look to stay relevant, access fresh revenue streams or even overhaul their entire business model. 

We are seeing that many of the targets in the current deal market are tech start-ups or niche businesses operating in high-growth markets. What you’re buying is the talent as much as the systems or market foothold. Their cultural DNA is agile, entrepreneurial and often unconventional. The appeal of acquisition by a larger enterprise doesn’t just include monetising the creativity and hard work that’s gone into developing the business, but also the chance to harness their innovations and develop their careers on a much bigger stage.

Unrealised potential 
We’ve seen deals where acquisition has been a win-win for both buyer and seller. We’ve also seen deals that looked good on paper, but the value was never realised. Common reasons include uncertainty within the acquiring organisation about what to do with the new capabilities and aligning digital skills and mind-sets to the new organisational culture. In turn, the acquired business can easily get lost and forgotten within the bigger group. Ideas and innovations can also be held back or even smothered altogether by slow and risk-averse decision-making processes and lack of understanding of how to enhance the newly acquired capabilities. The result? Key talent can become frustrated and leave.  

What would it take to avoid these pitfalls and make full use of the potential? We believe that making the most of and delivering truly transformational M&A requires a mindset shift within the acquiring business:


1. Embracing the possibilities of change
Looking forwards at how markets are changing and the possibilities this opens up, rather than looking backwards at how to defend market share and continuing to do what you’ve always done.

What capabilities would enable your business to capitalise on digital disruption and what role could acquisitions play in acquiring them? 

How can you look beyond preconceived assumptions about your own organisation’s capabilities and those of the business you’re buying? Also think about what a private equity acquirer might do with the acquired business to maximise value and lay the foundations for transformation.

2. Bringing innovation into the centre of the organisation
The ‘antibodies’ that stifle innovation include a culture that sees both new ideas and the businesses acquired to drive them as separate from the mainstream operations. Therefore, it will be slow to commercialise new ideas. Alongside a change of mindset, bringing innovation into the mainstream culture therefore calls for a shift in decision making processes, performance management and incentives.

3. Bringing ways of working up to date
Think about how to create an Employee Value Proposition and ways of working that are sufficiently agile and flexible to suit people who’ve worked as contractors and within small start-ups. A culture that embraces different working styles and capitalises on the digital platforms it can offer will have greater ability to integrate new workforces and products. 

Deal execution 

4. Identify value potential and mobilise the organisation behind this
When integrating capabilities-led acquisitions, it’s important to identify the essence of the value potential and how to protect and enhance it. This is likely to include how to retain key talent and how to give them the necessary scope and support to succeed. You want them to remain entrepreneurial, but also feel they have a future within your organisation. 

5. Hands-on integration team
The right team is vital. While project managers are clearly essential, it’s also important to include specialists who understand the nature of what’s being bought and how to harness it – a new technology, for example. 

6.  Sustain the momentum
The window of opportunity to deliver is limited, so it’s important to gain and sustain momentum. If there is a delay in realising the gains, the organisation will lose interest and the potential will be lost. It’s important to build in proactive monitoring and response by looking at lag indicators such as new product launches or customer enquiries rather than waiting for lag measures such as sales, by which time the post-deal momentum could be lost.

7. Take your organisation with you
Delivering deal value requires understanding and input from the entire organisation rather than just a few dedicated individuals or teams. Explain what is being bought, the value it can bring and how this will be achieved. These communications should form part of a regular two-way dialogue. The more your organisation understands the rationale, the more it can contribute to realising the potential.

Set up to succeed
So, opportunities for transformational M&A are increasing. But it takes a deal value mindset to make the most of these openings. Businesses with this mindset are not only equipped to execute the transaction quickly and effectively, they also have the culture, operational agility and talent management to make the deal pay. 

Our M&A report with Mergermarket, Creating value beyond the deal,uncovers how the most successful dealmakers have made M&A pay at every stage of their deal lifecycle. We share detailed insights on what makes an effective value creation approach, the role of people in culture in value planning, as well as insight into the first-hand experiences of executives on both sides of the deal. Download the report.

by Sarah Moore, Deals People Partner