Successful M&As: Notes From A Consultant's Playbook

CRN: You've said you're expecting the rate of mergers and acquisitions to increase but other people are not so convinced. Why do you think the volume of deals will grow?

Wolf: Yeah, I expect [the rate of mergers and acquisitions] to accelerate for the next 12 to 18 months, especially because interest rates are really low. When the cost of capital is as inexpensive as we're seeing in the current economy, it makes every move more attractive.

CRN: In addition to M&As, we're also seeing companies go private, or test the waters about going private. What is driving that trend? Do those strategies accomplish the same objectives?

Wolf: It's very complex. So you're starting to see more companies go private and build innovative new solutions for existing customers. You can't always do that as a public company when people measure your success by top-line growth. So the business can grow less but will have higher margins, higher value add, higher earnings and will create value.

CRN: When selling your company, what are some of the issues that need to be considered that most frequently fall through the cracks?

Wolf: Well first of all, the decision around who is the best buyer usually starts with who can write the biggest check the quickest. Then you need to get down to things like who's the most disruptive versus least disruptive for the staff. The principals also take their own plans into account. These would include things like, "Do I have to stay as long or stay longer?" and a number of qualitative issues. Remember that you are buying a living, breathing organization that has vendors, customers, employees, strategic partnerships, etc. You need consents and approvals from different people. You peel away the onion and test the overall value. You also need to begin the process carefully. Don't just show up and say we're buying your company because you will scare them off.

CRN: What are some of the more common reasons mergers and acquisitions fail to live up to their expectations?

Wolf: Most transactions fail for a variety of reasons. The biggest reason is that the buyers don't know what they're buying. So we make sure the buyers know exactly what they're getting in terms of strengths and weaknesses of the business, which is not necessarily just financials. It is important to look at the business model, the culture and the strategy, which are not necessarily among the first things that most people think about. A lot of people think about price or value, but you can't just look at those alone. You need to be very thoughtful, very deliberate, and make sure you know what you're getting. If you get it wrong, you end up with an impaired asset, in which case, somebody did not get the benefit of the bargain.

PUBLISHED JUNE 14, 2013