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M&A deals

Over 70% of M&A Deals Fail to Meet Their Goals — Beat the Odds With These 5 tips

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The last time we talked about M&A deals here on the blog, we were all wondering how the pandemic would affect the economy and watching some of the biggest players abandon deals in the pipeline or take the Covid chaos as an opportunity to get into the game. 

While the pace of recovery has varied among companies and sectors in 2021, U.S. deal volume and value are up from 2020 numbers and forecasted to continue to rise. Meanwhile global mergers and acquisitions for the first half of the year totaled a record $2.4 trillion, up 158% for the same period last year.

But even as the numbers continue to rise and many organizations sharpen their knives, M&A deals have also gotten more complicated. Let’s look at the why and how these changes should influence your approach to due diligence.

3 Major Changes Afoot

In recent years, M&A has become something akin to 3-dimensional chess (if players could constantly enter and exit and the rules were also a moving target). Three major changes contribute to the increasing complexity.

1. COVID-19 has hastened disruptive trends.

First, COVID-19 has hastened pre-existing disruptive trends across industries, drawing a clear bright line between business models that will succeed in the future and those that are outmoded. Rather than looking merely to deals that will create scale and cost synergies within an industry, organizations are looking to increase scope and add new capabilities, especially in technology, proprietary data, or scarce talent.

2. The M&A process is faster and more complex.

Second, the M&A process has become faster and more complex. Whereas corporate acquirers have always had the upper hand with deeper pockets and M&A deal experts to lean on, private equity players are giving them a run for their money. Nearly every deal is now an auction. Access to debt capital has been a nonissue during this crisis, so competition for attractive, high-growth assets is higher than ever. 

Add to this mix access to data, broadening regulatory scrutiny of deals on the basis of national interest, and a flood of major technology companies. Consider, for example, the involvement of Amnesty International in the Google, Fitbit deal. The organization sent a letter to E.U. regulators, arguing that they should block the deal unless Google addresses human rights issues like the right to privacy and nondiscrimination. Evaluating the environmental, social, and governance (ESG) impact is becoming an integral part of the diligence process. For many looking to make a deal, this is new territory.

3. COVID-19 has forced organizations to adapt their M&A deals.

Finally, COVID-19 has forced organizations to adapt quickly in a myriad of ways and M&A is no exception. In a 2020 Bain & Company survey of M&A practitioners, 70% of respondents reported that diligence was more challenging during the pandemic and 50% found it harder to close deals. Companies that adapted quickly, developing capabilities in virtual diligence and virtual integration, have made great strides.

The use of data in the M&A process is another differentiating factor. Smart M&A teams are leveraging data (and sometimes artificial intelligence) to screen for targets and create profiles, so they are ready even before targets come to market. During diligence, companies are using digital platforms to perform risk analysis and generate customer insights among other data collection to give themselves an edge.

As companies rewrite their M&A strategies for a post-pandemic world, some of the principles of what a good deal looks like still hold true. The most astute M&A teams understand the importance of proper planning and forethought in the months, weeks, and days before an acquisition. And they understand that due diligence goes well beyond the financials.

Beyond Financial Due Diligence

Given the above changes and the likelihood that M&A will continue to play an increasing role in revenue growth for years to come, it pays for leaders to get clear about their own approach to due diligence. In particular, it’s critical for organizations not to overlook the non-financial aspects of due diligence.

Now, don’t get me wrong. We aren’t trying to downplay the importance of financial due diligence. You need to run the numbers and they absolutely need to make sense. Still, all too often it’s non-financial factors that we see tripping up M&A deals. 

By non-financial due diligence, we have in mind:

  • Is this merger the right cultural fit for your organization? And, do you have a strategy for cultural integration once the deal closes?
  • Do you have a solid, agile, proactive M&A team in place and ready to jump into action when the right deal opportunity comes along?
  • Is this deal really the right deal showing up at the right time or are you suffering from deal fever?
  • Have you considered the intangibles? Here I mean variables like corporate reputation, brand promise, employee sentiment, and customer engagement? 

What can you do to position your organization for future M&A success?

We see five things leaders can do to equip their organizations for future M&A success:

Re-evaluate how M&A fits into your broader business strategy. As your business model shifts and you revise your corporate strategy, you will also need to update your M&A team’s goals. How has the pandemic affected your industry and sector? Does this change where to buy vs. build to remain competitive?

Consider non-traditional M&A. One of the ways in which M&A is changing is that companies are getting creative. Many are using a combination of joint ventures (JV’s), partnerships (with or without equity, with or without financial sponsorship), and corporate venture capital to tailor deals and integration. Also, organizations are partnering with other companies to explore opportunities for mergers and acquisitions. This lowers the risk and increases the likelihood of selecting the right deal.

Bring expertise into the process early. Given the growth in speed, scope, and capability deals, specialized expertise early on can help organizations better gauge fit. When you work with an external team like Audacia Strategies during the diligence process or even before, you get a set of eyes and ears in the room as an extra “gut check.” We know the transaction cycles, value creation opportunities — and how to avoid the trapdoors.  

Know the lay of the land and be ready to spring into action. The fierce competition for deals means that firms can no longer wait for bankers to come to them or rely on a singular source of deal intelligence. Companies need to continually scan the industry landscape, see how it’s evolving, and be ready to focus when an opportunity arises. Establish an ecosystem of external partners (bankers, tax and legal advisors, private equity experts, due diligence partners, etc.) who have access to data, connections, and can strike quickly.

Go beyond financial due diligence. When it comes to increasing capacity through an M&A deal, it’s not sufficient to simply understand the value of a target. You also need to assess factors like cultural fit, sustainability, and employee and consumer sentiment at the diligence stage. Consider also regulations and new challenges that may arise as your organization evolves.

The future of M&A is here. If you’ve been sitting on the sidelines, now is as good a time as ever to jump into the fray. The above will give you some orientation, but if you really want to ensure your deal goes smoothly, you need the right partners on your bench. At Audacia, we’re here to walk you through the non-financial side of due diligence. Contact us to talk about your M&A strategy. 

Photo credit and description: Group of people working around a laptop at an office by Flamingo Images from NounProject.com

failure communications

How To Do Failure Communications Right—3 Communications Lessons Learned About What To Do When We Fall

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We naturally spend a lot of time thinking about what a successful communications strategy looks like. This a good thing. Communicating your company’s message and values is crucial for standing out amongst your closest competitors. But have you also thought about a failure communications strategy?

<INSERT> Awkward silence.

failureRight. Let’s get uncomfortable today. Let’s talk failure. If you’re rolling your eyes now because you think you know what’s coming, keep reading. This isn’t going to be the “Failure is an amazing teacher!” pablum that we’ve all grown so tired of hearing. No. This is real talk about what to do when the sh*t hits the fan, when we disappoint ourselves and others, or when we just fall flat on our faces.

Rothy’s and How to Do Failure Communications Right

I recently received an email from shoe startup, Rothy’s, that stopped me in my tracks (Yes, Rothy’s is a favorite brand of mine. But don’t worry, this is not an endorsement or a sales pitch. It’s just an example of an excellent communications strategy). 

For months, Rothy’s had been teasing its latest shoe, a summertime slide with a vegan leather sole. The day before the shoe was supposed to launch, Rothy’s told its customers that the shoe’s launch was off. Apparently, scaling from prototype to production resulted in quality issues that couldn’t be fixed in time for the summer season.

The email they sent wasn’t a sale announcement or a giveaway begging customers not to leave. The subject line was: “Ouch.” The first line included the words “truthful and transparent.” It was an apology. But not the kind of lackluster corporate apology you might expect from a CEO who is clearly following instructions provided by legal. It was the kind of apology that left me feeling a greater respect for Rothy’s and its leadership.

What Rothy’s apology got right:

  • They took responsibility both for the mistake and for the decision to cancel the launch of a new product
  • They explained why they made the decision to cancel the launch
  • The reason they gave was all about looking out for the customer
  • They referred to their company values (i.e., “we pride ourselves on making the right decision—even when it’s really hard”) and their quality standards (i.e., “we will only launch product when every piece is perfect”)
  • They acknowledged how disappointing this decision is, but reiterated their confidence in making this difficult decision

They sent this email the day before the launch. 

Think about that—consider the time and money invested in design, marketing, production. Consider the sales expectations already baked into the firm’s annual plans. Think about the discussions that were likely happening behind the scenes to make the decision to pull the launch just hours before it was scheduled. Yet, they went through with the apology because leadership believed it was right.

3 Lessons Learned From Rothy’s Apology

If you stay in business long enough, failure is inevitable. Every seasoned business leader has “war stories.” Failure hurts. It hurts to consider the financial impact. It hurts to consider the customer impact and the blow to your brand (or personal) credibility. And, let’s be honest. It’s an ego blow. 

What sets apart those who master the art of turning lemons into lemonade from those who just leave customers with a sour taste? Let’s look at 3 lessons we can learn from Rothy’s literal failure to launch.

1. Failure can humanize your brand.

Failure sucks—there’s no getting around that—and doing the right thing can be incredibly painful. But as you work through the failure, acknowledging the pain humanizes your brand and aligns your goals with your customers’ expectations. 

When you fail, make it right if you can. But when you can’t, acknowledge the human aspects of disappointment and talk openly about how you will do better going forward. Trust your customers enough to put it all out there.

2. Transparency works.

Whether you’re communicating with customers, investors, or media, prioritize simple honesty. We don’t have to martyr ourselves or get too far into the weeds of how and why we failed. But we should be honest about the situation and what we’re doing about it. At the end of the day, this is all anyone can expect after a crisis. You can’t turn back time as much as you might wish you could.

3. Live your values. 

Failure is the greatest test of your values as a company. This really is where the “rubber meets the road.” After Facebook admitted to selling our data, one of the biggest criticisms was really a question about the company’s values. The “apology” ad reminding us of how much we all love Facebook felt like a sham after everything that came out. 

Communicating about failure, when done right, gives us a chance to remind others about our values, why they are important, and how they provide a better experience. That’s what I liked the most about Rothy’s communication. They acknowledged the failure right up front and they explained their highly personal calculus behind pulling the launch: that the poor quality shoe would be a bigger hit to their brand credibility than not launching the shoe at all. 

It was a fantastic example of transparency, honesty about business decisions, and a real example of living your corporate values. I’m sure that behind the scenes at Rothy’s HQ there are some heavy discussions taking place to understand why they failed on this product launch. But, they lived to fight another day and made their customers feel prioritized. 

Rothy’s launch fail is an excellent example of making lemonade out of lemons. You can perfect your brand’s lemonade recipe with these other blog articles:

And you can always work with a pro like Audacia Strategies to establish your failure communications or crisis communications strategy. We can also help create a strategy for successful communications, of course! Contact us today to talk about your unique needs.

Image by rawpixel from Pixabay

business best practices

Scale and Transform Your Firm: 4 Business Best Practices that Really Work

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Audacia Strategies doesn’t just help other companies scale and transform. We are also scaling and transforming our business. (Gotta live up to our name, right? Be bold, be daring, be audacious!) When it comes to business best practices, we believe in continuous adaptation as a necessity—not something to fear.

What this means for clients is that we approach each project with a focus group mentality. We aren’t afraid to experiment. In our philosophy, that we haven’t yet worked out the perfect pitch deck is not a good reason to sit quietly on the sidelines. We do our research, of course, but we also recognize that significant insights can be gained by stepping out of our comfort zones.

business best practicesI’ve been thinking about successful business best practices that we use with our clients and that we’re applying at Audacia Strategies as well. Over time, I’ve identified a few tactics that help businesses successfully scale and transform.

Start with the Goal in Mind

“If you aim at nothing, you’ll hit it every time.” ﹣Zig Ziglar

“Shoot for the moon. Even if you miss, you’ll land among the stars.” ﹣Norman Vincent Peale

These quotes might belong on one of those motivational posters we all love to hate, but that doesn’t mean there is no truth to them. Often when leaders or teams are feeling lost on a project it’s because they have lost track of their goal. So start with a goal in mind and refer back to it often.

Ask yourself and key players: Where do we want to be?

For Audacia, this means living up to our core values and thinking big. One value that we hold especially close is: Bold Actions Get Bold Results. But taking bold actions and getting bold results doesn’t have to mean selling out. Too often, firms treat big moves as a zero-sum game. They see transformation as synonymous with volatility.

True, there was a time when business best practices directed managers and leaders to seek out stability as a primary tactical goal. Now, with technology and automation bringing down the cost of starting a business considerably, leaders at large corporations must learn to adapt. They need to ask themselves where they want to be and figure out how to get there without disrupting what is working well. To be successful here, anchoring themselves in their core values is essential.

Breakdown the Walls Surrounding Your Goal

Ask yourself and key players: What do we need to achieve our goal?

When we miss our business goals it’s because we haven’t figured out (yet!) how to circumvent an obstacle. This is one reason we spend time in the beginning working with our clients to do a full analysis of what it will take to hit their big goals. It might feel like overkill in the beginning, but it’s better to identify potential problems and work solutions into the plan from the start.

Besides, what’s the worst that could happen? The potential problems don’t actually arise and your project finishes ahead of schedule.

In strategizing with clients and other business partners, I welcome opportunities to consider where we might face gaps in talent, technology, or process. I don’t shy away from looking for these gaps because I trust that we can come up with creative solutions. So, bring on the Murder Board!

Scaling can happen in different ways, for example. You might not have the resources to bring in the big shot consultancy firm, but perhaps you could hire a freelance consultant to assist your startup on a project basis.

Sometimes by thinking differently about employee engagement or adjusting internal processes you can find new ways to shift time away from administrative and toward strategic tasks. Figuring out how to get more hands on revenue-generating tasks is a perfectly acceptable way to scale.

Prepare for Talent Gaps

One challenge rapidly scaling companies face is a talent gap. You hustle and hustle working your sales funnel for months, then suddenly you’re inundated with work. It could be more work than your current team can handle or it could be work that calls for a skill-set no one on your team currently has.

Ask yourself and key players: What do we need today vs. tomorrow?

If you can anticipate the talent you’ll need for when you meet your goals, you can hire talent beyond the current need and avoid gaps that hurt the bottomline. Great people are hard to find and in a lot of industries they’re even harder to keep. Bear in mind that while you can train for business skills, you can’t train for passion or engagement.

Whenever you can, hire the best. Look to hire those with diverse thought, processes, and backgrounds. Studies show that diverse workforces are more innovative. Under strong leadership, collaborative teams that value constructive criticism as much as uplifting praise will bust through any challenge you put in front of them.

Best business practices for hiring:

  • Don’t be afraid to get creative: Do you really need to go through a lengthy hiring process to find a full-time employee or can a part-time employee or contractor fill the gap? Could you outsource any part of the project?
  • Don’t forget about onboarding: I’m working on this one for Audacia. How do we bring new team members up to speed quickly? How do I introduce contractors who are geographically dispersed? And how do I help them come together on the various projects they’re each responsible for?
  • Do document key policies and processes: Start doing this as soon as possible. Make sure these align with core values and beliefs about how to engage with clients and partners. Bonus: Looking at key policies and processes forces you to be very intentional. You will be deeply aware of critical interactions and intersections within your business as well as the roles and responsibilities required for success.
  • Do spend time thinking about company culture: Build it and reinforce it every day in every interaction and with every hire, client, and partnership.

Bring Partnerships in Alignment with Strategy

A list of business best practices wouldn’t be complete without discussing how strategy and partnerships inform one another. We are better when we cooperate with peers. Of course, you don’t want to give away your secret sauce, but be confident enough in your product or service to share when it’s mutually beneficial.

Ask yourself and key players: Are there opportunities for co-marketing, surge capacity alliances, filling in vertical vs. horizontal gaps in explicit capability and experience?

When you align partnerships with business best practices strategy, you will be more likely to spot 1 + 1 = 3 partnerships. I’m talking about business partnerships that go way beyond basic synergy. It all starts with knowing your business strategy and focusing on building the right business relationships.

These business best practices are really the tip of the iceberg. There’s so much more. If your firm is ready to take bold actions with a team that gets bold results, let’s talk!

Photo credit: pressmaster / 123RF Stock Photo

managing through change

Top 5 Tips for Managing Through Change Or What I Learned While Attempting to Surf

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There was a time in the not-so-distant past when executives had a simple goal for their organizations: stability. But market transparency, instantaneous communications, labor mobility, and global capital flows have swept this comfortable scenario out to sea. In most industries and in almost all companies—from giants to micro-enterprises—heightened competition from new markets have forced management to concentrate on something they happily avoided in the past: change.

Companies today need to figure out how they can capitalize on uncertainty. Success in this era means managing through change. A solid, static plan just won’t cut it. So rather than trying to plan for the inevitable and manage the change, leaders should turn their attention to managing through change.

What does managing through change look like?

Good question. I was recently thinking about this idea while on vacation—as one does. While it’s tough to come up with a one-size-fits-all methodology that fits every organization, perhaps a metaphor is a useful place to start.

Surfing and Change

My husband is a surfer. While he doesn’t get to surf as much as he’d like in D.C., we often spend vacations on the water. He surfs. I attempt to surf and spend a lot of time watching surfers and thinking about business metaphors.

On a recent trip, while I was bobbing in the ocean waiting for a wave (okay, more honestly, I was trying to catch my breath after falling and paddling back out for the hundredth time), I got to thinking about how surfing is like managing through change.

The best surfers are masters at riding the big waves. They know better than to try to manage the waves (I’m not even sure what that would look like). They don’t spend a lot of time hoping they’ll be able to stand up or planning to use the very best technique to balance on the board. They feel the flow of the ocean way more than they manage or hope or plan.

In broad terms, this is what it’s like to manage through change. Instead of bracing for the bump, skilled leaders accept that rough waters are coming, learn to embrace the change, and engage their entire organizations.

managing through change

Now let’s try to move past mere metaphor, shall we? Rather than offering a single methodology here, what follows is a “Top 5” list of best practices and guiding principles that can be adapted to fit a variety of situations calling for managing through the change.

1. Watch the sets come in.

In surf lingo, “set waves” refers to a group of larger waves. There’s a rhythm to the ocean on any given day or time of day. As you keep an eye on the horizon and watch these sets coming through, you start to get a feel for the rhythm and begin to prepare to catch a ride.

There’s also a rhythm to markets and if you watch the trends, you will get a feel for it. Managing through change means anticipating market trends and developing flexible strategies to prepare your team for what’s coming. In a highly competitive environment, that means going deeper than your competitors. Is there an untapped resource, you’ve had your eye on for some time? Perhaps it’s time to bring in that consultant or find another way to infuse fresh ideas.

In addition to being prepared for market trends, set your expectations. There are times when pulling back and being a bit more conservative is the right move. But this can be a hard pill to swallow, especially for highly competitive leaders and teams. So set the expectation from the outset: choose a date (or other benchmark) by which time to make a decision. Until then, maintain awareness, anticipate what you can, and prepare.

2. Be in position to catch that wave.

Sometimes the waves in business and on the ocean roll in more slowly than you would like. The “hurry up and wait” cycle can get old. So, make sure you are taking advantage of the waiting periods to understand where you are, what the wave (AKA change) looks like, and where you want to be at the end of your ride (i.e., you want to avoid being smashed into the rocks!).

Knowing your goal and having your exit strategy is just as important as riding that big wave as far as it wants to take you. Get in position by creating a game plan that’s flexible enough for your purposes:

  • Define success carefully. Consider the ideal goal, but also what, at a minimum, will count as a win. Be generous.
  • Do your market research. Don’t skimp on this step! Rushing into a big change without doing the right research sets everyone up for failure.
  • Understand your strengths and weaknesses. Transformation affects every level of your organization. Make sure you identify leaders early in the process and give them the tools they need to execute their specific missions. Also, look for any gaps in communication across departments. Strategize about how to create more cooperation.

3. It takes more work than you think to catch that wave.

Paddle harder (or, as my husband says/yells, “paddle, paddle, paddle, paddle!”). Once you know you are in the right position and ready to catch the wave, the real work begins. You have to dig deep and do the work to catch that wave, so you can jump up on that board. Then you have to dig deep again to maintain your balance and ride that wave.

We know all too well that market forces shift. So even if you brilliantly complete the first two steps above, the market can suddenly leave you stranded alone on a deserted island. Alternatively, if those market forces do hold in just the way you were hoping, you’ll likely run into others surfing the same wave. So you need to be ready to adjust to markets shifting AND to competition shifting.

4. Waves don’t always do what you want them to do—be ready to adapt.

Change projects, like big waves, pick up momentum as they build. If you aren’t prepared to adapt, things can get out of control quickly. This means leaders at all levels of the organization must be empowered to rapidly adapt.

Successful startups are often successful because they have mastered the art of managing through change in precisely this way. Their agility gives them a huge advantage over large competitors in a market that rewards adaptability. But even giants can adopt and modify plays from the startup playbook.

For example, what is the status of your innovation pipeline? Is there an effective process for employees at all levels to introduce ideas up the chain? Is the culture such that employees feel motivated, heard, and supported in suggesting innovations?

5. Enjoy the ride and watch the view—you earned it.

In the midst of all this, don’t forget to savor the moment. Even if you only manage to ride the wave for a short time, take pleasure in the fact that it was your hard work that helped you see this new vista. And, appreciate the hard work that it took to get there. Going through the process has given you insights that you can use in the future too.

Finally, get ready to do it all again. Change, like waves, keeps coming.

While the Audacia Strategies team can’t promise to teach you how to surf Banzai Pipeline, we are experts at helping firms of all sizes manage through big waves of business transformation. Hey, we’ll take our inspiration wherever we can get it! If you’re looking for a bold team to help you build your way through change, contact us and let’s set up a consultation.

Photo Credit: IKO / 123RF Stock Photo

murder board

Murder Board—It’s Not As Bad As It Sounds. How to Use Criticism to Prepare Your Team

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When you have what seems like a game-changing idea, what do you do? You probably start by doing some low-stakes, crowdsourced testing. You tell trusted friends and family before taking the idea to friendly colleagues. Eventually, you get around to proposing the idea to those who can help you implement it.

When you go through this early testing phase, you’re looking mostly for validation. This can bolster your confidence, which is great if you’ve hit on a truly great idea. But how often have you watched an idea fizzle and die a slow death all the while wishing you had killed it sooner? This is one reason to seek not only validation, but criticism in the early stages.

In the investor relations and corporate communications world, we have a name for doing this in a formal setting: Murder Board. What is it and how does it work?

Murder Board in Context

The term murder board originated in the U.S. military, specifically from the Pentagon, but is also used in academic, journalistic, government appointment, and business contexts.

Here are a few recent examples:

Political Hearings: As soon as Secretary of Veterans Affairs nominee, Ronny Jackson, was scheduled to go before Congress for his confirmation hearing, officials began intense preparations, including murder board sessions. Reportedly, these sessions went on pretty aggressively during the past few weeks, but have probably slowed a bit now that the Senate has postponed the hearing.

PR Crises: When Mark Zuckerburg went on his recent apology tour after agreeing to testify in front of Congress, he was put through the wringer by a team of lawyers and outside consultants. In addition to a “crash course” in charm, Zuckerberg received a real grilling during murder board sessions. Essentially, his team created as identical an environment as possible and went through a series of real run-throughs of what’s likely to occur. These lengthy sessions were strictly private and videotaped for review and critique.

Also, known as a “red team,” the murder board team’s main job is to poke holes. In the military, the red team tries to penetrate your defenses. In the high tech world, the red team tries to hack into your system. In short, the murder board finds the problems, risks, and bugs that the insiders miss. In high stakes situations, murder board sessions can save you from making a terrible mistake.

Why Is It important?

Murder board sessions might seem like overkill. It’s easy, especially for less experienced spokespeople, to believe that they are prepared for Q&A. But until they have practiced responding to questions under pressure, your preparation is not complete. So, make sure you impress upon your team the importance of setting up a murder board.

1. Prepares you for real-world experience and Q&A.

It’s helpful to consider worse-case scenarios before facing one in real life, so you can strategize as a team. Otherwise, you risk your spokesperson going off script and saying something that makes matters worse. I want my executives and clients to face the toughest questions for the first time in the room with me, not in front of an investor, a client, or a camera. The preparation will remind your spokesperson to focus on the facts and not speculation.

2. Stress tests company-held beliefs.

When pitching an idea or trying out new messaging, It’s always hard to be objective. This is as true of individuals as it is of teams. When you really want to step outside of the echo-chamber of your firm, a murder board with external voices can help.

Use a murder board to test beliefs about:

  • Company preparedness—especially good for crisis communications
  • Messaging—Is your message really resonating?
  • Customer relations—What do we actually know about our customer?
  • The organization—Does our message really hang together? Where are the confusing parts?

3. Stress tests your sales team and sales message.

Role play scenarios with your sales team ahead of a high-stakes pitch. Ask questions such as: How could the meeting go off the rails? What are the toughest questions the client could ask? What are the worst responses to our message we could imagine? Murder board sessions will ensure your team arrives prepared and ready to keep the meeting productive.

4. Gets you away from group think.

The most important part of the murder board process is bringing in a fresh perspective, often that of the client or stakeholder. Forcing a team to consider worst case scenarios requires them to think critically and figure out how to defend their position. Alternatively, forcing them to consider the client or stakeholder view, helps identify any gaps or missing angles that need strengthening.

Murder board sessions are simply the most powerful way to ensure that your media relations, investor relations, or sales team are ready for high stakes interactions. If any of these teams are “winging” high stakes meetings, their lack of preparation could put the whole firm at risk. So, let’s talk about when and how to use a murder board.

When to Use a Murder Board

A murder board can be used for any written or oral communications. It’s all about ideas and messaging. Here are three areas where a murder board can be most beneficial for improving communications.

1. Preparing for crisis situations.

If your firm has never had to deal with a full-on crisis, consider yourself fortunate. But also realize that your big crisis could be lurking just around the corner. It’s always a good idea to have a plan for dealing with a crisis and murder board sessions can play an important role in such a plan.

Assemble your damage control murder board and have them begin identifying issues and vulnerabilities within the company. It’s best if you can assemble a team who understands both the media and your firm’s weak spot. Next, have the team work on questions and ideal answers. These should be the toughest questions they can come up with and the best possible answers based on the facts. Finally, refine the answers and work to prep spokespeople.

2. Preparing for investors.

Murder boards are also great prep for analyst meetings, especially one-on-one meetings where executives need to be on top of their game. Here you’ll want to focus on both the message as well as recalling key company metrics.

For this one you’ll want to call in your toughest internal financial analysts and encourage them to live out their wildest inner Shark Tank dreams. Assemble your investor relations murder board and have them begin coming up with “tricky” questions regarding different angles on the numbers.

For example, suppose your firm calls for 10% year-to-year growth with sounds amazing, unless your biggest competitor comes out with an expected 15% growth rate. Now you’re behind in the investor’s eyes. What does it mean for your business and key competitive differentiators?

3. Preparing for customers.

Customers can be one of the toughest audiences. Murder board sessions are great training for sales teams. Use these sessions to prep them for their sales calls, a big pitch, or proposal presentation.

Assemble your customer relations murder board by having sales people role play with each other. Have newer salespeople play the “customer” role first to test the more experienced team members. Besides the benefits of being prepared for hard questions, this kind of exercise forces salespeople to put themselves in their customer’s shoes.

Final Thoughts

A murder board is an effective way to test your firm’s communications skills in a close to real-world situation. For high stakes interactions, there is no better preparation. Remind your team, though, that this is NOT a hazing experiment designed to throw off another team member. The point is to prepare your team, better understand your messaging, and better relate to key stakeholders.

One way to ensure that you get an objective perspective is to bring in an expert from outside your firm. Audacia Strategies can be that expert voice. We’ve prepared teams for investor meetings, crisis communications, and high stakes business transformations. We’ll help you put on your game face!

Photo credit: racorn / 123RF Stock Photo

building an IR program

Audacia’s IPO Roadmap to a Successful Initial Public Offering (Part Two): How to Build an IR Program

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A successful initial public offering requires syncing up several moving parts. If doing a product launch feels like playing “Twinkle Twinkle Little Star,” an IPO feels like playing “Beethoven’s 9th.” Of course, to play a symphony, you need an orchestra. For your successful IPO, that means building an IR program.

If you missed Part One, we discussed how to develop your IPO story. Once you have your story, it’s time to get operational. So, this week we’ll look at answers to the following questions:

How do you structure your IR program?

Who are the key partners and players?

What are the key tools and policies that will set you up for success?

Without further ado, let’s talk building an IR program.

First, Know Your Goals.

We’ve discussed what IR is and isn’t before. The main purpose of IR is to ensure a company’s publicly traded stock is fairly valued by disseminating key information that investors use to make smart buying and selling decisions. IR departments communicate with investors (obviously), research analysts, regulatory and oversight organizations, customers, suppliers, media, and the broader financial community.

ipo roadmapA solid investor relations plan will help guide your IPO discussions and ease your transition to a public company. The most important job? Establishing and building corporate credibility with your stakeholders through transparent and consistent communication.

Second, Gather Your Tribe.

Once your goals are clear, you can start to build your dream team of IR professionals. Hopefully, you have established and maintained strong business relationships over the years. Don’t be shy about calling on these contacts now.

Consult the following key partners and players:

Internal relationships: financial planning and analysis (make this a priority!) and finance team, general counsel’s office, external legal counsel, communications team, treasurer, business unit leads, product/service SMEs, and the C-suite.

External Relationships: service providers (Bloomberg, Nasdaq, IPREO, etc.), brokerages (JPMorgan, Jeffries, Goldman Sachs, etc.), stock surveillance (if using), public relations (if using and partnered with your internal communications team), your audit team (e.g., Deloitte, PWC, E&Y, etc.), and investment bankers.

Tools for Building an IR Program

We cover the basics below. Although we could get into using CRM systems, integrated blast email services, etc., for today, let’s keep it simple. Shall we?

Website: Your IR website is perhaps the most important tool for building an IR program and a non-negotiable requirement. Not only is your IR website often investors’ first introduction to your company and a perfect vehicle for disseminating your investment story, it’s also absolutely critical for conforming with compliance and disclosure requirements. I could go on about websites and their importance—a topic for another day!

Here are key recommendations to keep in mind for your IR website:

    • Make investor content easy to access—consider the user experience when designing your site.
    • Provide content that accurately describes your compelling investment thesis.
    • Keep the most requested information easy to find and download, i.e., earnings materials, investor presentations, etc.
    • Make contact information readily available. If you plan to be active on social media, include those links as well.
    • Make it mobile responsive—always good website etiquette!
    • Include governance information—officer and director information, committee charters and ethics documents, committee memberships, etc.
    • Keep a running list of company news/press releases.
    • Ensure that data feeds from the SEC and streaming stock quotes are accurate and timely.

IR platform: This type of tool will help to track consensus estimates on your firm and others, trading patterns, analyze your shareholder base, research and target new investors, review ownership trends, etc. These services also generally offer access to event transcripts, earnings materials, and industry, market and company analyses.

Many providers offer this type of service at varying price points. So, shop around. To operate efficiently and quickly it’s important to have situational awareness of your firm’s position among peers and within the market. These tools help you to track just that.

  • Examples include: Nasdaq, IPREO, Bloomberg, and others.

Stock Surveillance: While not a requirement—it can be pricey—this type of information can be incredibly helpful to understand the ebbs and flows within your shareholder base. It can also be a lifesaver when your CEO sticks her head in your office and says, “what the heck is going on with our stock today?!”

Stock surveillance is a service that focuses on tracking and analyzing movement in your company’s institutional shareholder base. Service providers will use a combination of publicly available data as well as proprietary and research-based methodologies and technologies.

There is a mix of art and science in this tool. It can be controversial, but I’ve found it to be very helpful in providing situational awareness. It is particularly important during times of crisis (market or company).

Key Policies for Staying on the Straight and Narrow

Every public company must decide whether and to what extent to give the market guidance about future operating results. The decision whether to give guidance and how much guidance to give is an intensely individual one. There is no one-size-fits-all approach in this area. The only universal truths are (1) a public company should have a policy on guidance and (2) the policy should be the subject of careful thought. As you continue building an IR program, keep the following policies in mind.

1. Reg FD

We’ve discussed Reg FD policy a few times. Specifically see:

Here are the highlights: Regulation FD is a fair disclosure rule, not an anti-fraud rule. This means that only conduct that is intentional or reckless can be considered a violation. Both companies and individual personnel can be held responsible and are subject to SEC enforcement actions.

Such enforcement actions can include injunctions, fines, and obligations to disclose the violation.

For more information about Reg FD and the SEC’s enforcement of the law, check out this list of frequently asked questions. But always remember that nothing you read online, including this article, is a substitute for qualified legal counsel.

2. Disclosure Policy

Your disclosure policy outlines the information your company will communicate on an ongoing basis and demonstrates your commitment to transparency. Avoid making the policy too narrow. It could come back to bite you during any potential litigation. Decide in advance who will be taking calls from various audiences. Spokespeople should respond to all calls as soon as possible, but most definitely within 24 hours.

This policy generally designates company spokespersons, approved channels of disclosure (website, SEC filings, social media, if your firm chooses to do so), handling of earnings and forward-looking guidance, and quiet periods.

A note on quiet periods:

The purpose of a quiet period is for a public company to avoid making comments about information that could cause investors to change their position on the company’s stock. There are no official guidelines on quiet periods. Practices vary by company requirement—for example, a Mega-cap firm that is part of the Dow may consider its quiet period to begin 2 weeks before the end of the fiscal quarter and conclude with their earnings report after quarter close.

However, a small-cap firm that is lightly covered may need to continue to take calls—even if they cannot answer some of the investor questions. In general, during a quiet period most companies either (a) allow no formal or informal communications at all (AKA all calls go to voicemail) or (b) allow limited communication and interaction with investors/analysts by:

  • Answering only fact-based inquiries
  • Sharing information only on overall long-term business and market trends
  • Announcing if it expects financial results to differ materially from earlier forecasts

Again, it’s hard to generalize here. Having a policy tailored to your IPO ensures that everyone knows the plan and has a common starting point.

3. Stock Trading Policy

The SEC has recently stepped up its efforts to detect suspicious trading. Sophisticated data analysis tools track shady patterns such as “improbably” successful trading across different securities over time. Many firms also make use of behavior analytics to uncover activities that could potentially lead to a range of trading illegalities.

Your stock trading policy should contain information for directors, officers, and employees to prevent insider trading. This article contains a list of best practices from someone charged with and convicted of insider trading. Hindsight is 20/20, right?

Concluding Thoughts

As with so many aspects of taking your company public, preparation is critical to success in building an IR program. So make sure that you have positioned your company to be successful in IR. An effective IR program will be critical to avoid stumbling out of the gate with investors and will help you to build shareholder value for the long-term.

Audacia Strategies can assist your company in building an IR program. We offer everything from investment case development to talking points for IR executives to financial guidance and forward-looking positioning. Let us know how we can help!

Next up: Congrats! You’re Public. Now What?

Photo credit: Andriy Popov

3 Steps to a Competitive Intelligence Strategy

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In my post last week, I kicked off our series on situational awareness with a discussion of the importance of knowing your company when it comes to discussing earnings with investors. This week we continue the conversation breaking down a second component of situational awareness, competitive intelligence.

While knowing yourself is key to putting your earnings in perspective for investors, another piece of this puzzle is knowing where your peers stand. In simple terms, figuring out a viable strategy for competitive intelligence means understanding your competition relative to your company and relative to major industry challenges.

Where do I even start?

Of course, figuring out where to start is far from simple. Clients often ask: How do I keep tabs on my competition in a respectable way? How do I create and implement on-going systems for competitive intelligence? And how do I translate the relevant information I find into the most meaningful format for my team?

Before I start going over details, let’s consider the big picture. I often describe competitive intelligence in terms of your company maintaining a “ready stance.” Like an athlete entering the ring with her opponent, you don’t want to be caught flat-footed by your competition. You want to be ready for anything and able to anticipate the moves your competition makes, so you can adjust accordingly.

So, what steps will help you take the competition by storm?

1. Rethink your competitive intelligence process.

Having a strategy is the best move you can make. Before you approach your board and investors, sit down with your team, develop a clear sense of scope, and think through the different roles members will play.

To guide your strategy, read through your competitors’ earnings transcripts. If their investor presentations are available online, look for clues about their perspective on the market. Are they taking a conservative, moderately conservative, or more aggressive approach? Finally, study their research reports. The more you know about their models and go-to sources, the more you can develop a competitive profile.

Also, make sure you don’t miss the forest for the trees. In other words, don’t just think hard about, say, your closest individual competitor. Looking at the market dynamic between several competitors can yield an innovative strategy, which could offer more guidance than studying any single competitor in isolation.

2. Talk to others in the industry.

When you see others in your industry at networking events or conferences, don’t shy away from talking shop. For example, when a colleague from research and development calls you up to ask about one of the models in your report, strike up a conversation about new federal regulations. While you should never ask about a specific company, it doesn’t hurt to ask for general feedback about your shared industry.

Now, I’m not suggesting that you do anything underhanded or anything that makes you uncomfortable here. Don’t think of this as digging for dirt. If you think of those you talk to as thought partners, your conversation will be cordial and mutually beneficial.

You will be surprised at what people are willing to disclose if you simply ask. Chances are you will come away from your conversation with information that can guide your investment choices and give you a better sense of where your competition is headed in the upcoming months.

3. Put processes in place for developing feedback loops.

Once you have thought about your own processes and gathered information about the competitive landscape, you can make the most of the information by establishing the right processes for getting it up the chain to your executives.

Bringing the information to the executives is really the final step though. You want to come to the table ready with a plan for implementing policy changes and systematically measuring results.

Also, keep in mind that data collection does not equal competitive intelligence. Competitive intelligence is more about creating strategy than it is about gathering loads of information. A little bit of information can go a long way. This means you don’t need to spend millions on a massive database and you shouldn’t simply dump data into the lap of analysts asking them to come up with a strategy.

Developing the right feedback loop requires an “all hands on deck” approach. Have a clear sense of the scope and role for each member of your team. Then take a few simple steps: mandate intelligence reviews at critical decision making stages; have a designated competitive intelligence analyst who sits in on all strategic meetings; and tap into any internal channels that can help implement strategies for competitive intelligence.

Parting thoughts

When it comes to competitive intelligence, the name of the game is to be proactive, predictive, and to revise your strategy according to what your competition might do. If you follow the above tips, you’ll be on your toes when it comes to monitoring your competition and staying on top of industry trends.

Used well, competitive intelligence will lead to increased strategic agility and the ability to adapt to market shifts. Don’t miss next week’s installment of our series all about what to do when markets behave badly. While we all have our fingers tightly crossed that the US election won’t upset the stock market, it doesn’t hurt to be prepared for the worst, right?

At Audacia Strategies, we’ve been practicing our “ready stance” for a long time. We don’t just provide flashy presentations and strategic advice from the sidelines. We roll up our sleeves and stand with you shoulder to shoulder until we achieve the measurable results you are after. Are you ready to schedule a free consultation and find out what a difference Audacia Strategies could make for your company?

Photo credit: ljupco / 123RF Stock Photo

investor relations

Investor Relations Starts At Home: 3 Tips for Disclosing Q3 Earnings

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This week it seems like everyone in the financial world has been obsessing over companies like Apple and Google releasing their Q3 earnings reports. For analysts, preparing to disclose earnings is one of the biggest challenges of investor relations. Wall Street has been in a holding pattern during the past 30 days. But the perceived wisdom is that if any of these big companies reveals an earnings surprise, it could be just the jolt investors need to bring them out of their malaise. I’d say the jury is still out though.

There is no doubt that quarterly earnings are a crucial measure to watch. Still, as you develop a strategy for communicating your company’s Q3 earnings to investors, consider that finding the right message is as important as the actual data you are communicating. It’s always a good idea to keep things in perspective. Since companies aren’t valued in a vacuum, having situational awareness is essential to communicating the right message to your investors.

In fact, situational awareness is so essential to investor relations that we think it deserves a three-part series of its own. So we’ll start off in this post with tips for helping you view your company from the outside in. We will follow up with posts about knowing your peers and knowing the market.

What is situational awareness and why is it key for your quarterly earnings strategy?

As you might have guessed, there are three main components to situational awareness: knowing yourself, knowing your peers, and knowing the market. Each of these components plays a role in preparing you to discuss your company’s valuation with investors. Investors want you to give them the numbers, but they also want you to help them interpret the numbers. Remember that they are looking to you as an expert on their investment.

This is especially true when it comes to disclosing earnings. Building a successful investor relations strategy is about getting into the minds of your investors. From an investor’s perspective having more information is always preferable to having less, so anything you can do to put those numbers in context will be well received.

Think of it this way. Which is more helpful for investors to know:

  • Your earnings rose 10%?
  • Or your earnings rose 10% while your closest competitor’s earnings rose 8%?

That the second one jumps out as more helpful demonstrates the power of situational awareness. Now, we’re not saying you call out your competitors’ results specifically but you definitely want to note the “industry-leading” results during your earnings call. An investor relations strategy that integrates situational awareness doesn’t simply focus on telling the story of your quarter. It also positions your company relative to how your peers performed and to how the market itself performed, giving your investors a more complete picture of your company’s performance.

So let’s talk strategy.

What does it mean to know yourself?

1. Know your company better than anyone else.

This should go without saying, but no one external to your company should understand your company better than you do. So develop your own models, craft earnings polls, and get into the minds of analysts to understand how they are really evaluating you.

Additionally, rather than making assumptions about what analysts are thinking about your company based on their research, reverse engineer the research whenever possible. Get your sell side analysts’ models and compare and contrast. If it becomes obvious to you that analysts are operating under incorrect assumptions, build some commentary into your earnings call discussion to explain any discrepancies and to give more context for their revised models.

2. Know what the analysts ask.

Examine the questions analysts asked about your company and your peers during the last quarter (or even during the last few quarters). Compare those questions to what they are asking during the current earnings season. For example, if analysts asked about the risks associated with a particular raw material three quarters ago, but haven’t asked since, this might explain discrepancies between your internal reports and the external reports you’re seeing.

Don’t simply assume the questions analysts ask are consistent from quarter to quarter. While it can be tempting to dismiss a lower than expected valuation from analysts on grounds that they don’t have the complete picture, investors will rightly hold you accountable for failing to anticipate and adjust internal models.

3. Know yourself relative to your peers.

This bleeds over into what we’ll talk about in more depth next week, but part of knowing yourself includes knowing how you will handle the release of peer earnings reports. Because many data points are more meaningful in the context of understanding industry trends, keeping tabs on your competition is key to understanding how to position yourself with investors.

For instance, in the defense industry where there has been a mostly flat business landscape for much of the past year, it makes sense for defense contractors to pull back and take a more austere approach to allocating resources. But if you know your competition is taking this approach, while your company is increasing its investment in research and development, for example, you may have a powerful discriminator that sets you apart from your peers. Well communicated and in context, a carefully considered, seemingly contrarian investment strategy could really pay off in potential valuation.

Long story short, if you aren’t keeping tabs on your competition and how they handle macro-issues facing your industry, then you are operating at a serious disadvantage. It’s a little bit like showing up to a tennis match with a ping-pong paddle. Of course, it’s important to work on your backhand, but if you haven’t studied your competition carefully, you risk underestimating them.

Stay tuned for next week’s continuation of this series on situational awareness and investor relations when we’ll discuss knowing your peers on a deeper level. In the meantime, if you would like help communicating a consistent and compelling investment story, we’re always ready to talk disclosure strategy (with as much geeky detail as you can handle, of course). No matter how well you know your company, we understand that it can be challenging to know how to frame your message and to develop the right outreach plan. Contact us today. We’ve got your back!

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