February 2018
MidMarket Talk: February 2018
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Dealmakers Planning for a Successful Integration: Performing Cultural Due Diligence (CDD)
By: Gary W. Craig, Managing Partner & COO, Vector Group, Inc. 

Last month In MidMarket Talk, What Dealmakers Need to Know: Cultural Due Diligence (CDD) made the case that CDD should be an integral part of making deals successful and sustainable. A quick review of the harsh reality is that most merger or acquisition deals fail. The reasons why are obvious.
 
Internationally the record of accomplishment of M&A activity results is quite poor. Multiple studies analyzing the last 30 to 50 years of M&A activity have documented a business success rate of less than 30%. One McKinsey study of 30 years of M&A activity concluded that 77% (and some studies show this at 90%) of the acquisitions failed to meet their intended business objective, over half failed to ever recover the documented costs of the acquisition and roughly a third were later divested or completely shut down. Any company's own data, while maybe better than international averages, may still show a less than desirable success rate.
 
Another series of follow-on studies identified organizational culture clash as the primary reason for failure in over half of the thousands of acquisition failures studied. We define "culture clash" as disagreements between people in the merged organizations concerning how to go about engaging in and managing the business. These types of clashes consume increasing amounts of energy and time to get things done and turn the focus of significant parts of the organization from "doing" the business to arguing about how it should or should not be done. Internal issues/arguments consume ever more resource leaving less and less focused upon the customer and performing the work. (Vector Group, 2017)

Culture clash is about the differences in opinions and assumptions as to the "proper" manner and behaviors involved in pursuing the business plan. Culture clash occurs when two (or more) groups have different beliefs about:  
  • What is important
  • What should be measured
  • How to make decisions
  • How to supervise
  • How to communicate
  • Who is and/or how to best serve, the customer 
Once again from last month's article, the question for Dealmakers must be: "Do you care (strategically or personally) how the deal goes after it closes?" Our contention is that Dealmakers can ensure the long-term success of their deals by including CDD. This should build their credibility and enhance their reputation.  Continue Reading>>
Collaboration's Greatest Enemy
By:  Martha Sullivan, Partner, Honkamp, Krueger & Co. & 
Chuck Mohler, Principal, Eagle Corporate Advisors

We all face a common enemy - ignorance. It impacts our lives daily in the work we do, the money we earn, and the communities we live in.

In the AM&AA community, this formidable enemy comes from many sources. Perhaps it springs from a lack of appreciation in the value that another part of the ecosystem brings to the table. Maybe it's driven by fear of the competition or an overabundance of confidence in one's capabilities. It could also be fed by the fact that we are all very busy professionals, working hard to close deals, finish projects, successfully run our companies and have a semblance of the good life.

The most profound disconnect in the Alliance ecosystem is the bond between the business owner and the members of AM&AA. In fact, the disconnect is so significant that many don't think of the business owner as being part of the ecosystem in the first place. But without him or her, what else do the rest of us have?  Continue Reading>>
Partnering for Success in the Lower Middle Market
Longtime member, Michael Pfeffer, Post Capital Partners, co-authored an article which was featured in the January 2018 issue of Mergers & Acquisitions. "Partnering for Success in the Lower Middle Market" discusses the  tangible benefits to executives in partnering with a private equity firm to find deals, develop an acquisition strategy, and grow the companies they acquire together. Continue Reading>>
News From Miami
At the January, 2018 Alliance of Merger & Acquisition Advisors' (AM&AA) Winter Conference in Miami, FL, Lee Dahmer and Mark Holmes facilitated a case study session on the above topic.  The objective was to illustrate how various actions, past and future, affect the value of a Company - regardless of whether or not a transaction is imminent.
 
Viewed from the perspectives of sellers, buyers and advisors, key discussion topics and takeaways included:
  • Someone, hopefully you, benefits from these actions or inactions on your side of the table.
  • How can advisors look beyond their professional microscope and run a deliberative process?
  • What is the cost of not implementing value growth as a mindset and process?
A special thanks to our friend Roger Schoenfeld of Cross Keys Capital for running the seller group from his usual position of advising owners on their Company's value in the market. Continue Reading>>
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(The Alliance) is the premiere International Organization serving the educational and resource needs of the middle market M&A profession. Formed in 1998 to bring together CPAs, attorneys and other experienced corporate financial advisors, the Alliance's 1000+ professional services firms - including some of the most highly recognized leaders in the industry-draw upon their combined transactional expertise to better serve the needs of their middle market clients worldwide.