The #1 Discipline for Strategic Acquirers


Companies seeking to succeed at making profitable acquisitions need to plan for the reality that while most deals take less than a year to transact, becoming deal ready takes years. Companies that are well prepared will have a much higher success record and achieve better return on investment.

Whether you have plans to acquire a company or a division in the near future or down the road, your team will benefit from “M&A education.” In fact, succeeding in your acquisition, long term, most likely requires specialized education.

Did you know that well over half of all M&A transactions fail to create the acquirer’s expected return on investment? In fact, most middle market companies that make an acquisition (specifically, 70% of those that made an acquisition in the past 3 years) had little to no M&A experience?1 This makes it easy to understand why teams need education: failure is the common norm and the root cause is overconfidence by poorly-prepared practitioners.

M&A education is all the more important when we keep in mind that roughly 20% of middle market companies complete an acquisition annually.2 Also, of the middle market companies that participate in M&A, 60% say it is vital to their growth strategy. In fact, these companies expect M&A to contribute a 26% share of their company’s growth in a fiscal year.

Watermark believes that great preparation starts with specialized education. Only by educating one’s team can a company master the unique rules, strategies, processes, language, and pitfalls associated with M&A. Education allows an internal M&A team to go beyond that deal table and take in the much bigger picture, such as the long-term prospects of a deal.

We like to look at M&A as a bridge.

When a company decides to make an acquisition, it steps out onto the M&A bridge. It must cross three phases on the bridge before it can step off it, at which time it can measure the success of the transaction. Success is measured both financially and strategically.

The first phase is called the preparation phase. Both our experience and research have proven that the greatest fumbles in the preparation phase occur by not having a well-defined M&A strategy and by poor target identification practices.3

In the second phase called the transaction phase fumbles occur in: the accuracy in valuing the target, the soundness of due diligence practices, and the timing and meaningfulness of integration planning. In the third phase of the bridge, the integration phase, fumbles include the failure to execute integration well, expected sales not materializing, the inability to capture cost & revenue synergies, and the inability to achieve cultural alignment.4 Dysfunctional integration practices are perhaps where the greatest number of fumbles occur in M&A.

Strengthening your internal M&A team with education requires a candid look at each phase, and steps within these phases, so that you know what it takes to cross the M&A bridge successfully. Then deciding on an economical way to educate your internal team is important. For several years, Watermark has been offering various masterclasses in M&A to tackle this problem for acquirers. We have conducted on site training, institutional training through Clemson University’s Center for Corporate Learning, and soon, will provide both online training as well as specialized classes for particular roles such as chief legal officers. Education is step one on a journey to improve outcomes in M&A. In future weeks we will share other steps along the M&A bridge for acquirers.

  1. These statistics are based on a 2018 survey of 400 strategic decision makers from middle market companies that completed either a sale or acquisition over the last three years. Middle market is defined as companies with revenues between $10MM to $1BN. “Middle Market M&A – What Executives and Advisors Need to Know to Make the Most of Mergers and Acquisitions.” Contributions from Prof. Solomon, Steven. National Center for the Middle Market. 2019.
  2. Ibid.
  3. Thomson, Russell; Dettmar, Susan; and Garay, Mark. “The State of the Deal – M&A Trends 2019.” Deloitte, 2019.
  4. Ibid.