M&A And Competition

M&A is hard and as you may recall from an earlier post, corpdev teams often have to contend with the dreaded question - “Is This the Best Option For Us?” when pitching a deal internally. Because for every deal, it always seems there is an ocean of ready alternatives, including other target companies or building instead of buying or just doubling down on existing business.

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But even after successfully addressing this question, there is another important question that must be asked, but seldom gets the necessary attention it merits. “If the target ends up with a competitor, how will that impact us?”

In competitive sale processes, there will be multiple buyers (strategic and financial), vying for the same asset. And while you are drowning in datarooms and diligence reports and sensitivity scenarios to come up with that perfect pitch and bid for your board to ruminate over, it is worth putting in that extra bit of effort to consider what a competitor could do with the target and how that might impact you.

Now, some of you corpdev and c-suite types might think that justifying M&A for the sake of eliminating a competitor or for that matter denying the asset to a competitor, might not be a good idea. And you would be in good company too, if you think so. That is what Mark Z had to say while contemplating the acquisition of Instagram.

But also think of world where Meta cheaped out and did not end up acquiring Instagram and Whatsapp - what shape would they be in then? And imagine if Google (or Tencent) had won over Whatsapp or Twitter had acquired Instgram. Where would Meta be? Imagine a world where Android went to a Nokia or a Microsoft. Imagine.

M&A can be risky and expensive and scary, sure. But a good acquisition in the right hands can single handedly grant the acquirer near unshakeable dominance that almost seems futile competing against.

So, when a good asset comes up for sale, you must carefully consider the implications of that asset ending up with a competitor instead of you and bring that up in the decision making process. Because, most decision making in the later parts of the M&A bid process gets spent on finding that right price & structure to bid at, while losing sight of how the competitive landscape would change post the deal. It is essentially a kind of opportunism that takes over (lets optimize on price, cash:stock, etc.) when cold & calculated strategy ought to be driving the decision making for M&A i.e. M&A being an extension of your strategy. M&A is not just another route to deploy capital or the means acquire fast growing businesses, it is in reality the only tool that the c-suite and the board have to achieve transformative outcomes for the business and tear away from the competition. Do not forget that.