What All Successful M&A Deals Have in Common

Why do many M&A transactions fail after the deal? Why do so many deals fail to get done in the first place? It may be because the acquiring company and the business targeted for acquisition aren’t a good fit, either culturally or operationally, or for any number of other reasons. In other words, some businesses simply are not meant to be combined. On the other hand, what is the secret to success for those business acquisitions that do work? Why do some businesses go on to great success after they have been sold? Find out when Jeff Allen visits with business advisor Peter Boni, author of the new book “ALL HANDS ON DECK: Navigating Your Team Through Crises, Getting Your Organization Unstuck, and Emerging Victorious.”   

Questions Answered For You

  • As a business owner who’s selling their business, why is it important to see the business continue and be successful after the sale, and not just walk away with your money?
  • What are some common characteristics of a successful sale?
  • How do you go about that process of elevating the values of your business?
  • How do you bring the two sides together when selling a business?

The mission is really defining your boiler plate in terms of the value proposition you're bringing to your customer set and how you're doing that. But a common value system really is part of a common organization. Without a common value system you have dissimilar operations.

- Peter J. Boni

Key Takeaways

  • When selling a business, you need to look for a good fit – a strategic fit, an operational fit and a cultural fit.
  • Finding that fit is a shared responsibility between the buyer and the seller.
  • When defining the culture of a company, you have to define the values of the organization. But it’s more than just defining the values; the management of the operation needs to walk the walk as opposed to just talk the talk. You can't define values and then violate them yourself.
  • When working on operational integration, it’s helpful to put together a task team of people to find synergies in the operational capacity of the organization.

Read Full Interview

Jeff: If you have a business in transition that involves an acquisition, whether you're the seller or the buyer, and you don't want this thing to blow up after the deal is done, you've come to the right place.

Peter: From our studio in Southern California, with guest experts from across the country and around the world, this is “Deal Talk,” brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Now here's your host, Jeff Allen.

 

Jeff: Welcome to the web's number one content source for small business owners committed to building a business for eventual sale. Here on “Deal Talk” it's our mission to provide information and guidance from our growing list of trusted experts that you and all small business owners can use to help you build your bottom line and improve your company's value.

Pursuing a successful transaction that will continue to be successful after the deal is done is our topic today. And to discuss it I'm happy to welcome Mr. Peter J. Boni. He is a management consultant with over 30 years of experience in the science and technology field. He is a business owner and twice recognized as Ernst & Young Entrepreneur of the Year. Additionally, Mr. Boni is the author of a new book, “All Hands on Deck: Navigating Your Team Through Crisis, Getting Your Organization Unstuck, And Emerging Victorious.” Peter J. Boni, welcome to “Deal Talk.” It's good to have you.

Peter: Good to be here, Jeff, thanks.

And I found that successful operations, successful organizations really have three different things in common. There's passion for the value proposition. There's a focus to deliver that value proposition to a constituency and there's really good people to execute the game plan.

Jeff: Thank you. An exciting time for you. You have this book that we're talking about here a little bit today. We'll refer to it from time to time, also tell people where you can get it. But, Peter, I don't think that we've really had enough of an opportunity to speak too much on “Deal Talk,” lately and that is about the importance of really pursuing a deal that continues not only to move forward in the process and allow you to transition out of your business, into another portion of your life, perhaps retirement or your next business venture. But a lot of us I think are very, very interested in seeing the deal succeed after it is done. Why is that important, Peter, first of all, for us to kind of understand why it's important that it's not just enough to be successful and walk away with our money, but that we see this thing continue after the deal is actually consummate?

Peter: There are things called customers, employees, constituents that are bought into the value proposition, you certainly want to continue with that value proposition as opposed to destroy it. You know, Jeff, for 30 years I was a CEO long before turning into a management consultant and also a venture capitalist. So I've done dozens of transactions, I think over three dozen transactions either as a buyer or a seller in total of maybe a billion dollars in value. So most certainly once the deal is done, there's lots more on the table to do. And I found that successful operations, successful organizations really have three different things in common. There's passion for the value proposition. There's a focus to deliver that value proposition to a constituency and there's really good people to execute the game plan. Successful ingredients for M&A, you're really looking for fit, a strategic fit, an operational fit, and a cultural fit. If any three laws are missing, you're going to be in trouble.

 

Jeff: Let's start with strategic fit first of all. Is this entirely incumbent on the new acquirer of a business? He or she is out there looking for a company that can help them produce more of what it is that they want to produce, or they're looking and getting into new markets, and so they're looking for something that is going to work for them.  Or is it just as important for the outgoing business owner, the one who is looking to be acquired, the target to be interested in this strategic synergy that we're talking about?

Peter: Good question, Jeff. It really is a shared responsibility. The seller certainly should be looking for a good fit just as well as the buyer should be looking for a good fit.

You got to stand for something. You can't stand for everything.

Jeff: With that said, how can they try to ensure, and we're going to take each one of these key principles or key aspects and talk about them one by one, how can someone who is trying to sell their business, or looking to sell it, and they've done all of their due diligence, how can they work toward finding that strategic fit? How can you get the two sides together? What needs to be done? What needs to happen?

Peter: Pretty simple questions to ask one another, Jeff, what's the division of each individual business, what's your charter or mission? Is it similar or dissimilar? What's your competitive positioning and the value proposition you bring to the customer? Is it similar or dissimilar? What's the go-to market strategy, is it similar or dissimilar? How do you gain and hold customers and increase value, is it similar or dissimilar? That's really the essence of strategic fit.

 

Jeff: Let's go ahead then now and let's talk about number two on your list, tactical operational integration. What about that? It's more than just the nuts and bolts of how things go together and how the companies actually work. Do they need to be in fact similar?

Peter: In a perfect world it's similar. In a second perfect world you can put together a task team of people to find synergies in the operational capacity of the organization. So that at the end of the day you want to feature yourself as one organization going to a customer set. And the people there really working for one employer as oppose to two or three different operations.

 

Jeff: Cultural fit we've heard, Peter, is more important today perhaps than ever. And one interesting program that I actually hosted recently here on “Deal Talk,” we discussed the importance of culture and the fact that it is very, very true, unfortunately, today that there are many companies out there where there doesn't seem to be an understanding amongst management of corporate culture and how significant that is to the operation, the very operation and the existence of the company and its success. Let's talk about cultural fit.

Peter: Yeah, some people define culture as how we do things around here. It's really defining values that the organization will reward in some way, shape or form. And not only defining the values but the management of the operation needs to walk the walk as opposed to just talk the talk. You can't define values and then violate them yourself.

 

Jeff: Is our mission statement kind of an explanatory statement or maybe a short sentence illustration of that culture that we're trying to get across, or is it just a small part of the culture?

Peter: It's really a small piece of the culture. The mission is really defining your boiler plate in terms of the value proposition you're bringing to your customer set and how you're doing that. But a common value system really is part of a common organization. Without a common value system you have dissimilar operations.

 

Jeff: Peter J. Boni is my guest today on “Deal Talk.” He is the author of “All Hands on Deck: Navigating Your Team Through Crisis, Getting Your Organization Unstuck, And Emerging Victorious.” Thirty years’ experience as a CEO and science and technology field, and as a management consultant now in the Philadelphia area. We're pleased to have him on board. Peter, you've been part of, you said, I think, about three dozen deals. Let me ask you, when one of those pieces is missing, strategic synergy, tactical and or operational integration, cultural fit, the chances of failure happen how many times out of ten?

Peter: If you count ten out of ten it'll run into significant wrinkles. My first example of this was early on in my career when I was asked to take over a division of a larger company that had three operations that they smooshed together to form one, and it was a good deal of company angst that the thing was such a botched combination. He had three different organizations, three different locations, three different billing systems, three different sales forces, three manufacturing processes, three different channels of distribution, three supply chains, three different corporate cultures, three different value definitions, and...

 

Jeff: Nobody wanted to learn the one way that would work for everyone, did they?

Peter: That was part of the task team, to get this to be one operation with one set of values. But one organization valued price, the other one valued quality, the third one valued service. It was definitely a botched thing right at the get-go. And a poor job of integration was done. So my job was basically to patch this puppy together and turn it into one operation.

 

Jeff: Think about it, price, quality and value, you put all three together, then you're talking about really the ingredients for success, you'd think, once you could get all those three things together on one sheet of paper.

Peter: You got to stand for something. You can't stand for everything. Hewlett-Packard is a perfect example. They put two huge companies together. One year they featured price, the second year they featured technology, the third year they featured service, the fourth year they featured quality. It doesn't stand for anything, and there's no wonder that the organization was such a botch.

 

Jeff: Peter, I'd like to go ahead right now. We'll have a break here in just a moment, but I'd like to start talking with you about steps to take, about what to do, putting all of these things together to kind of if not ensure successful transaction and post-transaction, at least take steps toward trying to ensure that that happens. So let's take these one by one here. Once a deal is done or even before it's finished, what can a business owner do, seller and or buyer to facilitate a successful transaction?

Peter: I've had the most amount of success, Jeff, by putting together a task team of people, not at the high levels of an organization but at the middle and lower, to where things actually happen, the operations, the manufacturing plant, the customers, the service, the deliver and so forth. And ask them to put together a very detailed plan of integration so that at the end of X period of time you've got one organization with one set of employees dealing with a customer as opposed to two or three different operations, dealing with a customer, dealing with an employee. I once put four organizations together at the same time and used that approach and actually they gave me a very thoughtful plan and we executed about 99% of that plan, perhaps with some legal and financial things they hadn't really thought of that we interjected into that plan. But when we executed it, we had truly one operation dealing with a multiple customer set and one set of employees dealing with one parent company as opposed to a variety of them. And they were all walking the walk with one culture.

 

Jeff: Peter, I know that you've been involved with so many of these deals in the past and you've also, like many of us have read about others and are aware of others that happen out there, but based on your personal experience, what one thing do you see or have you seen in your career come up from deal to deal that each one of these deals, whether they go right or they go wrong, have in common. Let's say the ones that don't go right, the ones that don't succeed, the ones that end up failing at the end of the day. What one thing do you think these particular deals have in common? That if one thing had been different could've resulted in a different outcome, something a little bit more successful?

Peter: Well, the key word is “fit,” Jeff, whether it be strategic, tactical and cultural fit, the key word is fit.

 

Jeff: OK, very good, and we've already highlighted that and so we'll move forward. Peter, we're going to take a little break. We've got so much more that I want to get to here that we're going to talk to you about concerning this idea of doing ones level best not just during the transaction but leading up to the transaction, and even afterwards to ensure that everything works out for all parties, that that transaction is successful, and that means through the transition. You go on to retire and do what you want to do, but that company that you worked so hard to build into a successful organization continues to succeed no matter what it continues to do afterward but as part of a new larger organization, how can you ensure its continued success in that post-transaction period. My name is Jeff Allen. I'm with Peter Boni, management consultant, author and a long-term entrepreneur, when “Deal Talk” returns after this. My name is Jeff Allen, and I'll be back with my guest Peter Boni when “Deal Talk” returns after this.

If you'd like to share your knowledge and expertise on any subject related to selling businesses or helping business owners improve the value of their companies, we'd like to talk with you about joining us as a guest on a future edition of “Deal Talk.” Interested? Contact our host Jeff Allen directly. Just send a brief email with "I'd like to be a guest" in the subject line. In a brief message include your name, title, area of specialty and contact information, and send it to jeff@morganandwestfield.com, that's jeff@morganandwestfield.com.


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Jeff: Jeff Allen with guest Peter Boni. We're talking about things that you can do to work toward making sure that your deal that you're putting together. Maybe you're the seller of a business and you've worked the last three to five years to prepare for this moment, or the acquiring company. And you want things to continue to be successful after the successful deal. We're talking to someone who has some experience in that area. Again, Peter Boni, we appreciate you joining us on our program. We've already touched on the real important items in this recipe for success, talking about strategic synergy, tactical and/or operational integration, and cultural fit. All those things need to fit. All those pieces need to come together. But what I'd like to hear, and I think maybe what our listeners might like to hear, and I think maybe what our listeners might like to hear are some real-life M&A examples, the kind that show how these three principles, when they come together and they fit together nicely, that these organizations can continue and succeed in the future after the deals are done. If you could, Peter, share with us some of the examples from your past that you see where these things all come together and produce the kind of results we're talking about here.

Peter: Sure, Jeff. I'm thinking of one that's fairly recent, and that is Ovation Guitar. When I retired as CEO of Safeguard Scientifics a couple of years back, I formed Kedgeway, my consulting company to help organizations maximize their value and then avoid, anticipate or overcome their obstacles to advance, and got exposed to Ovation. This was a fancy guitar. It was handcrafted in the 1960s. It was actually designed by a helicopter engineer. He had a rounded base on this and a very thin neck. It was an acoustical guitar, a 12- or six-stringed guitar. And it was very light carbon fiber materials, the same materials that they actually use to make the helicopter blades. Early on this guitar became an icon, handcrafted, and just beautifully sounding. Glen Campbell adopted it, Simon and Garfunkel, Cat Stevens, and then it went on, the rock stars, Mick Jagger, Rick Springfield, Melissa Etheridge, many of the blues, the rock, and the folk players just absolutely loved this guitar. It was lightweight. They could dance onstage and they have freedom of movement as well. The other founder had passed on and the family sold the business to an acquirer also in the music business, and they shuttered the manufacturing plant in West Hartford, Connecticut, farmed all of the operation out to Korea and then automated the process. It didn't really use the same kind of carbon fiber material as well, so the customers felt violated that it wasn't the same product. It didn't have the same craftsmanship and quality. The total deal was a botch.

There were four passionate people left in that West Hartford manufacturing plant that saves all the little pieces of machinery, all the tables, all the tools. And when they learned that Ovation was failing under new ownership, they began shopping around looking for another acquirer of the Ovation Guitar. They showed their passion, they showed their focus, they showed their talent. Another manufacturer of quality instruments, handcrafted, actually they made acoustical drums, bought the business. The value proposition was similar, the handcrafted quality insistence, the channels of distribution were similar as well. And they really tap the passion of the people to re-invigorate that manufacturing plant in West Hartford, Connecticut. Now Ovation is back in full business. New musicians are loving the old guitar just as the old musicians are loving the old guitar. So that really put in place all those strategic, tactical and cultural fit things, and the passion, focus and people that the successful operation needed to get on board. So here was something that failed that was put together and now is a raging success.

 I've had the most amount of success by putting together a task team of people, not at the high levels of an organization but at the middle and lower, to where things actually happen, the operations, the manufacturing plant, the customers, the service, the deliver and so forth.

Jeff: But I would imagine that that sort of thing, while it may happen on occasion, because of the time, I think, between the period that the company was acquired or gone overseas and the time that were to resurrect themselves. there was some time there that was required for all of these things to finally come together. But in most cases, though, Peter, it would seem like that might be kind of a rare situation. Is that true, or does this happen actually more often than we probably realize?

Peter: I'd say it was a rare situation. When you destroy something it's hard to put it back together.

 

Jeff: It sure is. Peter, along with that, you mentioned just a little bit ago, and we haven't mentioned it, that your organization that you have, this is your company called Kedgeway, is a way that you work with business owners to help elevate the values of their organization. That's something we talk on “Deal Talk” all the time and how important that is. How do you do that? We could talk probably for days about that and there are probably 1,000 ways that individuals can work toward elevating the values of their companies, but it's so important and that's why people listen to this show. How do you start by going about that process?

Peter: The approach that I put together, that I touched up on my book “All Hands on Deck: Navigating Your Team Through Crisis, Getting Your Organization Unstuck, And Emerging Victorious,” I call the ABC's to advance. There are three phases of the ABC's and each phase has four steps. They begin with the letters ABC and F, so hence the ABC's to advance. In the very first stage you want to hatch your plan and you want to do so in such a way that you've embraced the people that you need help from in order to execute your plan. So hatching the plan has four components, A, very simple, ask questions and listen. And while you're at it, ask for some help. Gosh, the rock star from JCPenney who was hired from Apple went in with guns blazing with a plan and spent tons of money to execute that plan and the customers left in droves, because he never vetted the plan. He never asked for help, he never exposed anyone to it, he just went in guns blazing. And it took a few years for the board to figure out that, man, this thing wasn't going to work and thousands of people lost their jobs and billions of dollars were lost. The stock went from $50 to $5, all because he didn't follow the fundamentals of, A, asking questions and listening, and while at it, ask for some help.

B, base your plan on what you hear and see, and maybe by background and experience, base it on what you don't hear. Base it on what you don't see. C, challenge the sacred cows, challenge the conventional wisdoms. Inertia is a very powerful force and the status quo was very powerful. Your 8th grade science teacher was right that inertia is a powerful force. So challenge the sacred cows, challenge the status quo. And when you get your plan together share the vision of that plan and create a collective energy, because at the end of the day, you can't do it by yourself, you need people to help you execute. Getting to your second stage, kicking off your plan really enables you to align your people. A, just act boldly in the execution of your plan any time... I'm tentative actually. I find I get hurt. B is building your strengths.

C, control through invisible measurement of things that really count. My son's little league coach used to post all of the statistics of the entire team. What was your RBI's, errors, fielding in so on down the line. And the kids really paid attention to that, and frankly it improved their game. That little league team ended up winning a championship that year. Very simple, by making visible the things that you want to measure. And then streamline the activity schedule. I'm really recommending an off-site meaning to do that. Review the mission and vision. You go to market strategy, your competitive positioning. Get an elevator pitch down that everybody can recite. What are your two or three goals, functional area by functional area. What do they have absolute have to do, critical success factors to achieve those two or three goals. And then your action plans are all lined up accomplishing the same thing. You can also do a skill sets assessment while you're doing that and define the culture that you want in your operation and find ways to reinforce that culture. So that's streamlining the activity schedule and then aligning the organization. In the final phase when you're executing you want to stay on track. Assert yourself to the absolute focal point of what you're doing and recognize that nothing's going to be perfect. George Burns was right, that real life happens while you're making other plans. So you need to stay focused and assert yourself at the focal point of what you're trying to accomplish and not let the noise around you weigh you down.

B, borrow from alliances and partnerships. Don't try to do everything yourself. C, actually over-communicate, where are we going, how are we getting there, where we're going properly, where we're going awry and where we need to get back on track. And then when things begin to go your way, that final lesson is share the rewards of wealth and recognition for the people that helped you as opposed to taking an individual bow. Follow those ABC's in your life, in your business, in your organization, even if it's a nonprofit and most certainly you will advance. My book is comprised of half a dozen case studies that show people in varying walks of life utilizing the ABC's and how they advance themselves and advance the organization at the same time.

When you destroy something it's hard to put it back together.

Jeff: “All Hands on Deck: Navigating Your Team Through Crisis, Getting Your Organization Unstuck, And Emerging Victorious,” it's by Peter J. Boni. Peter, it has been an absolute delight to have you on our program today. I would imagine that your book is available at all the usual places including Amazon, Barnes & Noble and probably a number of other stores online, right?

Peter: Yeah. It's certainly available online, through Amazon as well as Barnes & Noble. You'll find it in a variety of retail stores as well.

 

Jeff: By the way, this is one of the top sellers in its category. So if you're looking for a great read that will be helpful to you in many different ways, not only in your business but also in life in general, perhaps with your family and your relationships with respect to those individuals that you work with, your second family, your team and just in general, you need to pick up this book and you need to read it. And you need to also learn more about Peter J. Boni. You can find out more about him by the way by checking out LinkedIn. Check out his profile there. Peter, again, I want to thank you so much for your time. It's been great to have you, and I'd like to have you back on this program again.

Peter: Thanks, Jeff. I appreciate the opportunity. Anyone can check out my website, www.kedgeway.com.

 

Jeff: Very, very good, that's Peter J. Boni. Again, we thank him so much for joining us on the program today.

Tell a friend about “Deal Talk” in addition to morganandwestfield.com. You can find us on iTunes, Stitcher and Libsyn. “Deal Talk” has been brought to you by Morgan & Westfield, the nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com. My name is Jeff Allen, thanks so much for listening. I look forward to talking to you again soon.

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