How Startups Can Leverage M&A As A Scale-Up Technique Throughout The Pandemic

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How Startups Can Leverage M&A As A Scale-Up Strategy During The Pandemic


KEY POINTS

  • Even in eventualities the place we’ve got a vaccine in place, the flexibility to attach with clients and constituencies remotely will stay important.
  • M&A provides you what you want most proper now, which is velocity. Moderately than holding again throughout a worldwide pandemic, now’s the time to contemplate the strategic choices to maneuver ahead sooner.
  • Throughout instances of change, you will need to spend time participating with clients and companions and to continuously revisit your product technique to assess alternatives of differentiation and important gaps.

After I scan the information for M&A bulletins, I do not simply see a listing of offers which have closed, however a report of predictions. At its core, a enterprise deal is an settlement between two or extra events who’ve come collectively over a shared imaginative and prescient of the longer term. Firms which have a robust sense of future route are investing now – when issues appear most unsure – and following the maxim that one of the best ways to foretell the longer term is to make it.

Regardless of all of the uncertainty that COVID-19 has prompted in our lives, the pattern in direction of distant and digital is common. The pattern in direction of digital was after all already underway previous to COVID-19. Nearly all the things from buying to promoting, for each customers and companies, has been migrating from the bodily world to the digital one.

Even in eventualities the place we’ve got a vaccine in place, the flexibility to attach with clients and constituencies remotely will stay important. Perhaps the fortunes of Zoom, Amazon and Peloton will return to their stratospheric acceleration, however the reality stays that digital adoption as measured by e-commerce exercise has jumped additional previously months than within the prior decade.

With a pattern that’s this clear – the proverbial puck going clearly into one route – M&A provides you what you want most proper now, which is velocity. Moderately than holding again throughout a worldwide pandemic, now’s the time to contemplate the strategic choices to maneuver ahead sooner. At Episerver, the corporate I lead, we made two smaller acquisitions within the winter after which made our largest and most strategic acquisition throughout the summer season, with the acquisition of Optimizely.

Fortuitously, our traders, Perception Companions, share our perspective on the way forward for digital. I consider that we, like many profitable start-ups, are usually not simply sharing the identical imaginative and prescient as the businesses we have acquired but additionally making that imaginative and prescient a actuality. As my groups and I’ve labored to make one firm with one tradition and one model out of the companies we’ve got introduced collectively, I assumed I would share some learnings for individuals who could be (or hope to be) in the identical spot.  

Scale for the longer term, don’t consolidate the previous

For those who’re a start-up, use M&As to place your self for relevance and differentiation sooner or later, not as a approach to consolidate your present place.

It is established firms which have the posh to make use of M&As defensively. They will survey the panorama for brand new territories after which merely select to buy reasonably than struggle for them.

However as a start-up, your benefit is velocity in all issues. For those who’re not scaling shortly, you are not utilizing what’s your greatest benefit towards greater gamers. You should use M&As to hurry into new markets, shortly bolt on capabilities that you do not have the time to construct in-house or purchase expertise you possibly can’t get another method. 

Ask your self: Do the corporate you’re buying cowl areas the place you may need to develop? Does its merchandise complement or duplicate your individual? Do its clients and gross sales channels compete with or full your individual? Does the market share it serves duplicate or increase the one your organization serves? There are lots of methods M&A can provide you velocity, however there are prices in vitality, time and cultural disruption to contemplate.

Constantly assess your product technique

Throughout instances of change, you will need to spend time participating with clients and companions and to continuously revisit your product technique to assess alternatives of differentiation and important gaps. Up to now months, we in all probability spoke no less than twice every week about our product technique, assessing construct, accomplice and purchase choices alongside a continuum of important capabilities.

You will need to have a transparent framework for assessing your product technique. In our case, we first stack ranked the shopper necessities from most necessary to least. Then we scored ourselves towards these necessities and used suggestions from companions to validate our personal evaluation. Based mostly on this rating and benchmarking, we then mentioned the extent of funding and experience wanted to construct it, accomplice or purchase the capabilities. 

Write down the story

Because the CEO, I personally have discovered that at completely different factors within the M&A course of, it is smart to take a step again and write down the core speculation in your individual phrases. Within the case of our newest acquisition, I did this once we first needed to resolve to kick off the due diligence course of, once we needed to resolve on the definitive intent, and in addition previous to the announcement.

Moderately than itemizing all of the issues that may very well be constructive in regards to the acquisition, it’s a litmus check to examine in case you have the one stable motive why it might be constructive for patrons, staff and shareholders. 

Due diligence stays due diligence

The due diligence part throughout COVID-19 doesn’t look all that completely different than pre-pandemic. Since all due diligence is completed remotely and throughout time zones, it requires self-discipline to set clear milestones and to have interaction assets appropriately.

Communication should occur throughout all ranges – chairman to chairman, CEO to CEO, CPO to CPO and so forth. This communication is important, and it takes an additional effort to make sure that you keep in full alignment, even when your peer isn’t just down the hallway. Particularly as questions come up, you need to have the ability to shortly resolve them. On the constructive facet, we have been capable of join many key folks from each organizations throughout the course of.

As a start-up, leverage your networks

In case your start-up is already scaling shortly, it implies that you had the precise imaginative and prescient for a specific business or product on the proper time. But it surely would not observe that you realize all the things about learn how to handle M&A. Generally it takes a accomplice with extra expertise or a broader standpoint that can assist you see what your true differentiators are.

Within the case of Episerver, we’re lucky to have the steerage of Perception Companions, a profitable personal fairness progress investor. They’ve supported us not simply with capital however with great perspective and recommendation.         

Keep in mind that COVID-19 brings extra challenges to post-merger integration

If you find yourself able to make the acquisition, take into account that working remotely brings new challenges. The cultural integration that’s so necessary to post-merger success begins with the communication platforms that your firms are utilizing.

Is the corporate you’re buying on Slack or Groups or one other platform? Is there a simple approach to join your groups and begin constructing a standard tradition? How can you make sure that managers in each firms articulate the longer term imaginative and prescient accurately?

Most of the similar points that leaders want to handle throughout an acquisition are amplified and turn out to be extra pressing as you’re employed remotely. Be ready to spend a big quantity of your time and your management workforce’s time on communication, and have a plan in place on learn how to convey your two firms onto the identical digital platform shortly.

Alex Atzberger is CEO of Episerver, a digital commerce resolution



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