This is the second blog in our Best Practices for Mergers & Acquisitions Blog Series, where we explore the essential components of successful M&A strategies. Today, we consider a critical question that arises for many organizations embarking on an acquisition: Should you create a dedicated M&A team or rely on your existing resources? While both approaches have their merits, choosing the right path can significantly impact the success of the entire process.
The Case for a Dedicated M&A Team
Specialized Expertise and Focus: A dedicated M&A team brings focused expertise to the table. These professionals live and breathe mergers and acquisitions, ensuring that each aspect of the process—from due diligence to integration—is handled with precision. Their specialized knowledge can often accelerate deal-making by improving decision-making speed and reducing potential oversights. Instead of stretching existing employees across various roles, you gain a team entirely committed to making the M&A a success.
Faster Decision-Making: With a dedicated team, decisions can be made more quickly and effectively. Unlike departments juggling multiple priorities, the M&A team can focus solely on the task at hand. This leads to quicker responses to market conditions, regulatory challenges, or negotiations, which are critical in fast-moving environments where time is of the essence.
Risk Mitigation: Mergers and acquisitions are fraught with risks—legal, financial, and operational. A dedicated team is better positioned to identify and address these risks head-on, as their sole responsibility is ensuring the transaction proceeds smoothly. This heightened focus often leads to better risk mitigation strategies, ultimately protecting the organization from potential pitfalls.
The Potential Downsides of a Dedicated M&A Team
Cost Implications: Forming a specialized M&A team can be expensive, particularly for smaller organizations or those with limited resources. The salaries of experienced M&A professionals, coupled with the potential need for external advisors, can put a strain on the company’s finances. For some organizations, the cost-benefit analysis may suggest that relying on existing resources or a hybrid model is more financially viable.
Siloed Operations: One of the risks of having a dedicated M&A team is the possibility of siloed operations. When a group works exclusively on M&A deals, there’s a chance they might lose touch with the broader organizational goals and operations. This disconnect can lead to friction between the team and other departments, which could complicate the post-acquisition integration process.
Balancing Internal Resources and External Advisors
For many companies, the ideal approach lies in finding the right balance between internal expertise and external advisory support. A hybrid model leverages the strengths of an internal team—who understand the company culture and strategy—while also tapping into the experience of external advisors who bring specialized insights and a fresh perspective to the table. This collaboration can streamline the process, ensure alignment with the company's objectives, and mitigate the risk of siloed decision-making.
Conclusion
Deciding whether to form a dedicated M&A team or to rely on existing resources is not a one-size-fits-all solution. Both options present distinct advantages and challenges, and companies must assess their internal capabilities, financial constraints, and strategic goals before making a decision. A well-balanced approach, utilizing internal resources with support from external advisors, often offers the flexibility and expertise necessary for a successful merger or acquisition.
Supporting Quotes:
“M&A success depends on the right combination of speed, strategy, and execution.” – Paul Gompers, American Economist and Professor of Business Administration, Harvard Business School
"The success of an acquisition is not just about the deal, but about the planning and execution of the integration." – David Harding, Author, Mastering the Merger
“Dedicated teams bring focus, but only collaboration brings success.” – Michael Treacy, Former Professor, MIT and Author, The Discipline of Market Leaders
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