Who needs an M&A playbook?

Creating an M&A playbook - a standardized approach for mergers and acquisitions implementation can help your organization to run projects more effectively and succeed in realizing the #deal value. In the process, transparency is increased, creating more trust and better collaboration

Taru Weckroth

21.4.2021

We at Midagon M&A practice are most often involved in the implementation of major "once in a lifetime" mergers, acquisitions and carveouts. In these cases, it is clear that our client is working on something unique and transformative, and at least so far, there has not been a business case to build the required skills in-house.

However, in the past couple of years we've worked for more clients who have several implementations - sometimes both acquisitions and divestitures - under their belt, and good business reasons to continue the non-organic growth track. They often have an effective deal team and the fundamentals of implementations are well understood. However, it could be that implementations are piling up and the deal value is not realized. They would like to standardize their M&A implementation approach and run their projects more effectively in-house.

Creating and formally enforcing a "playbook" - or an M&A implementation approach, model, operating procedure, or blueprint - is an investment. It requires knowledge of best practices in M&A. However, it can't be done as an external consultant study alone. The company’s internal factors are decisive. People who understand company-specific processes and systems will provide the most valuable input.

The focus of the playbook should be to realize deal value effectively and in a timely manner. The activities and processes described in the playbook should be piloted in a real implementation project and fine-tuned in each implementation.

The right balance needs to be struck with very detailed instructions that help make practical implementation activities very straightforward and standard. There will probably also be more generic instructions that leave room to adjust the approach but may also leave unnecessary room for interpretation and error.

An M&A implementation playbook should contain at least the following topics:

1. Governance: purpose and use, implementation strategies, roles and responsibilities, project phases and decision-making gates, status reporting and benefits realization monitoring

2. Implementation project planning: current state assessment and gap analysis, project planning and initiation, definition of done, activities at deal closing before implementation starts

3. Implementation project execution: organization and process changes, IT system implementation, testing and data migration and cutover to live system use

4. Business as usual: implementation project closing, handovers to support model, lessons learned and benefits realization assessment

An effective playbook should support all typical implementation strategies that the acquirer regularly uses. For instance, if some acquisitions are fully integrated into the acquirer's processes and systems, then that should be instructed clearly. However, if other acquisitions are only consolidated in financial statements but left to run their business separately, then those implementation activities should also be instructed. If implementation strategies are very different, then separate playbooks could be created for each strategy. For smaller differences, pointing out the variations in one playbook could be more effective.

The most professional playbooks are implemented in systems specifically designed for M&A portfolio management and implementation. They allow the standard approach to be set up as a template and facilitate implementation project management and reporting. However, we've also seen relatively simple spreadsheet tools with typical implementation project activities, durations and dependencies set up as templates. A typical, effective set is some presentation materials to train the approach, the main text-format document to contain details, and a project setup template in a spreadsheet or a tool.

The codified knowledge in the playbook should be supported by the growing tacit knowledge of a team of key in-house experts which can be called on to work on implementation projects. The playbook will also require continuous ownership and maintenance, when processes and systems evolve.

An unexpected benefit we often see during playbook creation is that transparency and collaboration between the deal and implementation teams, as well as all parties involved in implementation, improves considerably. Playbook preparation requires reflection and discussion on many practical details and serves as a "dry run" of real implementation activities. Mutual trust and respect tend to increase.

The investment in the playbook is paid back when M&A activity is frequent, in at least one significant transaction every one to three years. We have not yet heard from any of our clients that the effort spent on M&A playbook creation has been anything less than worth every minute and euro spent. Is this the right time for your company to set up a standard M&A approach?