The New M&A Consultants


In my last post I commented on the opportunity that has risen in the mid-market with the concentration of investment banking focus on major deals. There’s a chance for third-party advisors like Capstone to do more than fill the vacuum recent events have created.

However, it’s important to understand what the gap really is — and actually always has been.

The problem with investment bankers is their hunger for the deal. It’s a healthy instinct in itself, but in the world of mid-market M&A where I operate it needs to be held in check by a broader perspective. The Capstone “road map” for acquisitions comprises three major components of which “Build The Deal” is only one — the third and last. The first two components are “Build The Foundations”, which establishes the strategic objective, and “Build The Relationship”, which sets the stage for successful negotiations.

Investment bankers by training and inclination tend to rush to stage three, “Build The Deal”, without giving adequate attention to “Build The Foundations” and “Build The Relationships.”  If you want one reason why 77% of M&A transactions end in failure, this is it.

To win at this game, you must know exactly why you are making an acquisition. As I’ve written elsewhere, successful M&A deals are driven by ONE clearly defined reason. Arriving at that one reason takes a process of strategic analysis.

As soon as you have your strategic objective, and a clearly defined path to achieving it, you’ll begin exploring possibilities with a number of target companies. There is a tremendous amount of skill required in this process of courtship, which may be going on simultaneously with several potential acquisitions at the same time.

M&A consultants to the mid-market who help their clients through these two challenging stages will have far more success with third stage, closing the deal, than most investment bankers. I know this for sure, because the success rate of Capstone’s deals is so far above the average.

This is a period of enormous change in the financial, business and  worlds. With change comes opportunity for creativity and leadership. Who do you see rising to the challenge? I’d welcome your comments on this.