It's A Deal

November 22, 2007

Let The Fun Begin, Again

Wall Street folks are an optimistic lot. The credit crisis probably hasn't even hit bottom yet, but a sizable chunk of interested parties has declared that the worst is not only behind us, but that it's all behind us. Gee, that wasn't so bad.

Meanwhile, for an M&A market that's been comatose for months -- with the exception of the resilient mid-market arena -- there's talk of rejuvenation. Why? Well, we're not sure.

Color me skeptical -- I think it has something to do with giant, sophisticated banks not knowing what their stuff is worth -- but in the spirit of the approaching holiday season, I'll also jump on the M&A-is-about-to-take-off bandwagon.

There, it's settled. Now that we've established that deal-making will return to lofty levels in, say, the next day or two, there are a few things we should know, courtesy of Deloitte. The firm just came out with a report that identifies four problem areas in strategic M&A.

First and foremost (and this could be really important as the M&A machine starts cranking up): Don't get sucked up in the M&A current. To wit, respondents to Deloitte's survey who conceded that their companies seldom meet their M&A goals were almost as enthusiastic about doing more deals as were the respondents who said their deals actually worked. (My hunch is that the underperformers do more deals to try to cover up for the previous ones that didn't work. Or maybe these low-achieving companies just really like lawyers and investment bankers.)

Second, and this is one that you should write down: Consider the long-term strategic implications of M&A. Apparently the low achievers don't. Third on the list is listening to different points of view, and fourth is making sure that follow-through capabilities are strong. For the low achievers, getting things done rapidly is seen as the most crucial deal-management task. And that's why they're low achievers.

It's borderline scary to think that anyone running a company, of any size, is tied to any of these four problem areas. Um, if the merger doesn't make sense, don't do it, and at the very least don't make a bad deal even worse by doing it quickly. Rules to live by as merger mania resumes, shortly.

(c) 2007 Investment Dealers' Digest Magazine and SourceMedia, Inc. All Rights Reserved.