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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

Corporate Communications

Cut the Crap: Putting the Humanity Back into Corporate Communications

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Maybe it’s all the election coverage or the fact that I haven’t been in the same room with anyone outside of my immediate family in almost nine months, but my tolerance for corporate-speak is hitting the floor. And I don’t think it’s just me.

If there ever was a time to get human, it’s now. What does this mean? In the simplest terms, it means cutting to the chase with our corporate communications and messaging. Your audience is clamoring to feel seen and heard. So why not give them what they want?

Take a look at my best tips for putting the humanity back into your corporate communications.

1. Think Like a Reporter

Whether you’re working on a value proposition (i.e., what makes you unique in your market?) or a restructuring message to share with investors, strip away all the complexity and find simple language. 

One way to do this is to think like a reporter. Journalists are trained to give the who, what, where, when, and how of a story in the first sentence or two when reporting on a story. Replicate this tactic by getting your marketing and communications teams together (or go outside of these departments for a different perspective) to brainstorm: 

  • the what, 
  • the why, and 
  • the what’s next.

Whatever you think of James Carville’s politics, he is a master communicator and strategist. During Bill Clinton’s 1992 campaign, Carville knew exactly how to drill down and develop core messages that were simple, memorable, and meaningful. Carville used his most famous quip, “it’s the economy stupid,” along with “change vs. more of the same” and “don’t forget health care” to anchor messaging throughout the campaign. The election results speak for themselves.

2. Dump the Buzzwords

As one health reporter brilliantly puts the point in this Atlantic article, “if there’s anything corporate America has a knack for, it’s inventing new, positive words that polish up old, negative ones.” These buzzwords do more than whitewash or paper over the stuff we don’t want to talk about, though. They also obscure your message and make your organization seem less authentic.

In this time when everyone is distracted by a global pandemic, an unusual Presidential transition, and how both could affect their future, it’s more important than ever to dump the “disrupting,” the “pivoting,” and the “growth hacking.” 

Your employees and customers don’t have time for this. They want you to give them information they can act on. If you confuse them with jargon or industry terminology, they will ignore you. So cut the crap.

3. Get Vulnerable

What can you do instead of resorting to the safety of buzzwords? Get vulnerable. Be careful here, though, getting the tone right takes a lot of nuanced thinking. And I’m NOT suggesting that you manufacture adversity. But if you’ve faced a genuine struggle that has made you rethink how you do business, it may be the time to share the new ‘why’ behind your ‘what’.  

You can make sure to stay within critical communication guardrails by letting your organization’s authentic voice be your guide:

  1. Pay attention to the voice of your leadership team and use it to steer messaging.
  2. Make sure your corporate communications reflect your company culture.
  3. Take a step back and consider the big picture whenever communicating with the media, your audience, and other stakeholders. 

4. Step Away from the Webinars

In relation to considering the language and the tone of your corporate communications, you’ll also want to think about the method of delivery. I’m not a speaking coach (though I am happy to hand out referrals to great teams), but I find the formality of webinars often results in participants feeling totally disconnected.

For this reason, we have been recommending that clients step away from webinars in favor of less formal interviews, discussions, roundtables, open mic Q&A, etc. While it may make sense to give a short written statement or update to kick off an investor meeting, listening to written remarks being read for any longer than 10-minute intervals is probably too much to ask from those on the other side of the camera.

Regardless of the format, to ensure that you are connecting with your audience, spend some time practicing your delivery. In fact, if you can spare the time, put more time into practicing your delivery than you do writing up your remarks. 

Why? This world of virtual meetings we all inhabit makes it harder to feel a genuine connection. If you’re the kind of speaker who draws on the energy of your audience, then this is even more true for you. Ask these questions as you prepare for your next town hall meeting:

  • Would my grandparent understand what I’m saying?
  • Have I removed all the jargon?
  • Have I included smart visuals that are easy for my audience to understand almost immediately?
  • Do I have a story or narrative to share?

Above all, be mindful of the ways in which your customers, your employees, and your investors are more distracted than they’ve ever been. When your communications cut to the chase and avoid the corporate-speak, your audience will feel seen and heard.

With these tips under your belt, you’ll be ready to send a clear message with your corporate communications. Is it time for your organization to get human? Contact us and let’s talk! 

Photo credit: Transgender woman leading meeting by Noun Project from Noun Project

M&A strategy

5 Key Findings from a Survey of Executives: How to Think About M&A Strategy During an Economic Earthquake

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One of the million- or billion-dollar questions firms are asking, given the pandemic, is whether this is a good time to pursue M&A strategy. Looking to high profile players, you’ll find examples both of companies, like Boeing, abandoning deals and companies, like Google Cloud, publicly saying they are open to acquisitions.

To guide your thinking about M&A best practices through the end of 2020, it makes sense to consider what we know about how firms are currently making decisions. The M&A Leadership Council recently conducted a survey of 50 C-suite executives and senior corporate development leaders about their plans. 

Let’s discuss the major findings from the survey and what they mean for you as you think about strategically positioning your firm to succeed when economic activity rebounds.

1. Deals in Progress

The good news is that deals are still getting done, especially those in later stages. While just over half (51%) of those surveyed reported a “temporary pause” in M&A activity, only 14% indicated they had halted all deals currently in the works. And 12% actually reported expediting late-stage deals, while another 12% indicated that they fully intended to proceed to deal closing assuming negotiations go well.

What does this mean for you?

If you’ve put the brakes on a merger or acquisition, it may be time to reengage your vetting process and due diligence. Go back and review your M&A best practices checklist to make sure you’re going in with eyes wide open. Pay special attention to the items on the list that may have shifted with current events and those that are most likely to be volatile as the economy sorts itself out.

Proceed as follows:

  • Meet with your project team to regroup and discuss moving forward
  • Review monetary and non-monetary assets and business priorities
  • Make an exhaustive list of questions that have recently come to light

2. Anticipated Deal Volume

With regard to deal volume, it’s no surprise that 26% of executives report a substantial reduction in the number of M&A deals for the remainder of 2020. Additionally, the 51% of executives reporting that they are on a “temporary pause” expect to remain paused until they see signs of an economic recovery, which is not likely to happen before the end of the year.

Despite this sobering news, 23% of respondents anticipate no significant change to or an increase in the number of M&A plays they pursue this year. For buyers staying in the M&A game, four motivations were prevalent:

  1. Seeing opportunities in M&A hotspots
  2. Looking to gain the “first mover advantage,” while other prospective buyers are still in shock and trying to sort out their plans
  3. Needing to innovate or reposition for post-COVID market realities
  4. Wanting to accelerate commercialization of the most promising new technologies, medical advancements, or delivery systems

What does this mean for you?

You aren’t necessarily crazy if you’re seeing opportunities for M&A plays. If your balance sheet is strong, your stock price steady, and access to credit solid, it may be a great time to keep your eye on who you want to partner with as we reinvent our post-pandemic work lives. 

3. Deal Objectives

Many companies are predictably broadening the scope of deal types they’re considering. While 57% indicated they’re most interested in doing deals similar to those they’ve done in the past, the data also suggest these acquirers simultaneously shopping in several different strategic deal-types.

59% reported their intent to opportunistically buy distressed companies and 23% said they are targeting new, non-core technologies, solutions, or segments to intentionally diversify their future revenue streams.

What does this mean for you?

Acquiring companies that are struggling during tough economic times, but which will likely thrive quickly once the economy picks up steam again is a valid M&A strategy. Play your cards right and you could end up with a really lucrative deal, while saving a technology or smart solution, which might otherwise be lost to the dustbin of history.

It’s also a good time to consider how to diversify or reinforce your own revenue streams. Many firms experiencing a slowdown in the past few months have taken the time to strategize about insulating themselves from future economic distress. One savvy strategy is thinking outside the box about new ways to bring in revenues and develop new efficiencies.

In addition, for firms concerned about their own ability to weather the pandemic storm, a “marriage of survival” may be a mutually beneficial solution. If you know of a competitor or adjacent company that you suspect to be in a similar struggle for survival, it might be worth a phone call.

4. Operational Challenges

Sellers in prime position will be in high demand. Any sellers who are ready to do a deal, but confident about surviving the economic lockdown, will be prepared to hold out until P&L statements recover. So finding the best play may be more of a challenge than you anticipate.

Additionally, this may call for a level of due diligence and dialogue that some buyers aren’t prepared for. For instance, looking at 2020 financials, to what extent have core fundamentals, competitive pressure, or other internal or external factors impacted the drop in revenues? How confident are you that the impacts attributed to COVID are accurate? Also, how should your leadership team evaluate and validate the target company’s rebound plan?

What does this mean for you?

If your firm is eying an M&A strategy as a buyer to gain market share, keep in mind that the most attractive sellers will be in high demand. You’ll likely need to get creative about bridging the valuation gap. Consider: 

  • Valuation, 
  • Deal structure, 
  • Growth incentives, and
  • Talent retention.

Your strategies here will need to be simple and convincing to win the bid. Remember, acquisitions, even in the best of times, are highly emotional transactions. Now is not the time to spare the empathy. If you want the transition to be smooth, be sensitive during this delicate dance.

5. M&A Capabilities

Finally, survey respondents reported they are calling in reinforcements to bolster their internal M&A capabilities. For many firms, operationally executing an M&A strategy amidst so much economic uncertainty, across all deal phases, and over multiple deal-type scenarios requires a level of M&A sophistication beyond what they currently have in place.

As the chair of the M&A Leadership Council, Mark Herdon, cautions us: “Mergers and acquisitions are notoriously difficult in any environment and post-Covid, they may be even harder. Setting aside political sabre rattling from the recently proposed ‘Pandemic Anti-Monopoly Act’ [which could also throw a monkey-wrench into your M&A plans], even the most skillful acquirers may be hard-pressed to navigate other real-time acquisition challenges.”

What does this mean for you?

Upleveling your M&A strategy means upgrading your M&A operating processes, playbooks, software solutions, skills, and resources to enable working remotely for any deal type, market environment, or deal volume. To support your crisis recovery strategic objectives, consider carefully any gaps you might need to fill.

Of course, shoring up your M&A capabilities need not require a long internal hiring process. Working with an external team that has significant skills and experience in the M&A space offers several advantages. Audacia Strategies offers a network of specialized partners who bring specific expertise, depth of resource, and proven experience. Check out our services to see how we can support you. 

Photo credit: Gino Santa Maria

Voice of the Customer

Want to Know What Your Customer is REALLY Thinking? Voice of the Customer Can Be a Game Changer

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We are committed to helping clients make progress and develop new strategies for our new reality. Voice of the Customer (VOC) analysis is a valuable tool to deploy to stay connected to customers, demonstrate commitment to serving them well, and gain valuable insight into how to best (re)shape your business strategies (which are probably in flux). Download our Voice of the Customer brochure here for further information on services offered. 

Do you know what your customer thinks of your firm? 

No, I mean what they really think.

Do you wonder how to get honest feedback from your customers? Do you worry that your preconceived notions or conventional wisdom gets in the way of understanding your customers’ real priorities? 

We all know understanding our customers is key to business success and yet, the pace of day-to-day operations and the span of stakeholders across most organizations can force managers to make assumptions about priorities and even customer satisfaction. 

This may be because traditional feedback loops are more prescriptive and formal or because there is a natural hesitancy to probe too deeply into customer satisfaction. Whatever the reason, a Voice of the Customer (VOC) study can provide an additional channel for customer communication and insight.

To get you started, Audacia Strategies CEO, Katy Herr, sat down with VOC strategist and Audacia Strategies partner, Robin Kogelnik, to talk about the what, the why, and best practices for a Voice of the Customer strategy.

Robin brings to the table over 20 years of experience in business strategy, market and competitive analysis, and business development operations. She has led Voice of the Customer and Voice of the Employee studies in classified and unclassified environments for a wide range of clients from large aerospace firms to small businesses and nonprofits. 

To find out how your firm can benefit from VOC, check out these highlights from Katy’s interview with Robin.

Q | Can you talk about what a Voice of the Customer is? What is a Voice of the Customer survey?

A Voice of the Customer study is a very positive and effective way to connect with and get unfiltered feedback from your clients. It’s a structured set of interviews conducted by a third party to gauge how things are going beyond formal communications and normal day-to-day interactions. 

Why do we recommend a third party? Honestly, it makes the process credible and limits the second-guessing! Someone who isn’t directly involved with your day-to-day work and isn’t involved directly with the customer can ask the questions and record the answers objectively. There are no filters, agendas, or assumptions that can interpret a customer’s response or skew the results. 

In my experience, doing a Voice of the Customer study is a discriminator—it shows that you genuinely want their feedback and it really underlines your commitment to their success.  

Think of it as one more powerful tool to add to your customer relationship management and business development arsenal. 

Q | Can you explain how the process typically works?

First, you and your account and business development teams know the customer best. You select the individuals to include in the study and provide all the contact details. We’ll help you prioritize the information you need and craft a set of interview questions that will provide the kind of insight that you can act upon.

Obviously, the number of interview questions has to be realistic and respectful of your customers’ time. We never ask for more than 30 minutes. Sometimes interviews take less time, and sometimes people talk and talk (which is wonderful!). But if the initial ask is too much, they’ll say no. So be disciplined and keep it to a manageable number of questions that focus on the information that you truly need.

Now, the goal is always to get unfiltered feedback, so you want to give customers the opportunity to tell you the good, the bad, and the ugly. You can get that kind of honesty when any and all feedback is on a non-attribution basis (AKA anonymous). 

Anonymity is key because it gives people the opportunity to open up in a way they’re not afforded on a daily basis (particularly for those who work within the government).

There are a lot of different ways to conduct the interviews and capture the customer’s feedback, but you want to make it as easy as possible for them to participate. What I’ve found to be the most effective is having the conversation over the phone. The calls are scheduled whenever it’s most convenient for the customer. 

“I’ve had interviews with customers at 11:00 pm and 5:00 am, and I jump at the chance. It reinforces how important they are, how much you value them, and how much you value their opinion.”

Phone interviews give customers the most schedule-flexibility, but in an interesting and subtle way, they reinforce the fact that their feedback is on a non-attribution basis. It creates an environment that gives them the freedom to relax and answer questions in an unguarded and thoughtful way. “I always joke that it must be like going to confession!”

“All joking aside, we take the non-attribution structure very seriously—from beginning to end. In our reporting, we summarize the feedback by topic to ensure there’s no traceability back to any one individual. We do capture everything verbatim, and we include direct quotes to provide the right amount of emphasis (i.e. the customer’s emphasis) when it makes sense and when it helps to highlight the importance of any particular feedback.”

Q | How do you see clients using this information once they have it?

Well, that really depends on where they are in their business development cycle—whether they are concerned about a particular account or they have a big recompete on the horizon or if they’re interested in branching out into other areas within the customer organization. 

It’s also been a great way to check in with customers after a big internal reorganization or after a merger. There are times when things are moving so quickly that you decide you need to call a timeout: How is everything going? What are we doing well? What’s not working? 

This is a way to get clear on how you’re doing and the customer’s priorities.

“Ultimately, though—and this is key—this information helps clients prioritize how to spend their time, how to spend their resources, whether they need to make personnel changes, whether they need to shore up a particular service or support they provide, or even whether they need to change partners or bring on a new partner.” 

I’ve also worked with companies that are interested in developing their value propositions and trying to understand what differentiates them from their competitors. I think this is a valuable insight: Why did they choose you? What do you do that separates you from everybody else?

And your value proposition is another one of those things that can very easily be subsumed by company dogma and generic corporate-ese. You might assume, as most companies do, that you know what differentiates you from your competitors. But hearing it from the people that are evaluating you against your competitors will either confirm the messages you’ve always relied on or provide you something more. Insights that can guide how you position for the next program, how you qualify and quantify your value in a proposal, and how you compete for business. 

Q | It sounds like it’s helpful across the customer life cycle. It’s helpful when you’re in business development and for your positioning. It’s helpful for taking the pulse of the customer once they’re on board operationally. And it’s helpful for keeping that pulse throughout the customer service journey—showing “we care, we want to know, and we listen.”

Absolutely. I think going beyond just making sure that you’re on the right track with deliverables, it’s important and it shows that you want to invest in doing all the right things for your clients. For many clients, the Voice of the Customer study becomes a real value add. Even if you don’t always like the feedback, it’s such a positive process and experience. 

An extremely high percentage of customers I’ve interviewed (I won’t say 100%, but a very high percentage) are very glad they’ve been asked to participate. They say things like, “Thank you. This is a good thing to do. I really appreciate that they included me in this process.” They feel good about your company because you’re going above and beyond. They feel good because you chose them, you respect their opinion, and you want their feedback. 

Q | Are there best practices in conducting a Voice of the Customer study that companies should think about when they’re embarking on their planning or thinking about how they might utilize the information?

Yes. First, when you’re planning your VOC, in order to get relevant feedback, you want to get a representative sample of the people that your company, i.e., your personnel, are interfacing with. So you want to contact customers working at different levels and in different functions—not just manager to manager, but a 360-degree evaluation.  

Also, ask questions that get at the information you need, like: How has it been going contractually? Or on the financial and business management side? How has it been going in terms of service delivery or technical deliverables? How are we doing from a program management perspective? How are we doing on subcontractor management, partners, and bringing on the right people and skill sets? 

Finally, if you decide to do a voice of the customer study, you need to plan to follow up with them afterwards. You certainly want to acknowledge and thank them for participating, and you don’t want them to think that it was a waste of their time. So you can use the results to continue to build those relationships. 

It’s important to say, “Hey, this was a big help. We really appreciate the feedback. It gave us a lot to think about (or it gave us a lot of good ideas on how we can improve).” It doesn’t mean you have to throw a lot of money at anything and it doesn’t force you to commit to anything. It does give you another opportunity to have follow-up conversations, to continue to build trust, to get direct feedback on how you can move forward and how you’re doing, and to show that you’re always focused on helping them succeed. 

Q | Is there any one thing that you wish your customers would know about Voice of the Customer, either to get a better outcome or something that would make the process easier for them to make a decision on or to get more people to participate?

Yes, I think it helps to set the tone for the whole exercise if you introduce the idea to your customer informally. If it seems too formal and strict, they’re going to be reluctant simply because the formality makes people wary.

“And don’t be afraid of being straightforward about why you’re doing a VOC. Maybe the company’s in the midst of a change, maybe it’s spinning off, maybe it has just been acquired, maybe there have been layoffs in other parts of the company, etc. Some big change is happening at the company, and you want to check in and see how things are going. We always want to keep it positive right from the beginning. So I encourage people to just bring it up during a regular meeting or give them a call and let them know your plans.” 

For instance, say your business development lead has a great relationship with one of her counterparts onsite. Ask her to bring up the idea the next time she’s onsite or mention it on a call, “Hey, we’re thinking about doing this study, and we’d really love it if you can participate. Would you mind if our consultant gave you a call and asked a few questions? It’ll be quick, and just think, you can really let us have it if you want to!” 

Sometimes people are concerned about why the study is being done, but it’s a very positive experience all around and it’s never about trying to disrupt anything or to get “dirt.” Customers feel very good about being asked to participate. 

And you can set the tone at the very beginning for what this experience is going to be like—you want your customer to know that it’s going to be very positive, it’s going to be very easy, and say, “we’re only asking a very select group of people, the ones whose opinion we value the most.” That might sound like hyperbole, but it’s true.

Q | This has been hugely helpful, Robin. Thank you so much!

So, there you have it: a Voice of the Customer study can be a game changer for your business strategy, your business approach, and your customer relationships. Consider the opportunities investing in unfiltered customer feedback could open up for you. (And, by the way, this works for getting employee feedback too! We call this…wait for it…Voice of the Employee (VOE).)

Audacia Strategies now offers VOC and VOE services. Download our Voice of the Customer brochure for further information. If you’re looking to “get under the hood” and get an unfiltered read on your customers’ or employees’ experiences, we’re ready. Book your consultation session today! 

Photo credit: HONGQI ZHANG

business growth

Does Size Matter? Planning a Successful Transition from a Small to Large Business

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Business growth is always a hot topic. And lately, we’ve been having a lot of conversations with clients and potential clients about how to grow. But what really stands out is that the challenges are not so much about growing per se. They’re more about how to grow smart.

You see, when a small business is absolutely killing it, it runs the risk of outgrowing the (super helpful) “small business” designation. Suddenly, the issues are all about translating what is working well at this level to the next level and the translation is almost never one-to-one. And for businesses that work with federal, state, or local government offices there is even more to think about. It’s not unlike learning to play 3-dimensional chess.  

Yes, there are better and worse ways to move from being a big fish in a small pond to being a small fish in a big pond. So, let’s talk about how to do it well.

Mini Case Study

For instance, consider the following typical business growth scenario:

I’m a federal 8(a) or certified small business in my key market areas and I’ve been so successful that I’m about to graduate from “small business” to “large business” in the eyes of my customers. This is awesome because I’ve figured out my market and I’m on an incredible growth trajectory. BUT—How do I preserve the “special sauce” of being a small business while I grow? How do I maintain my growth trajectory? How should I think about shifting my marketing and sales strategy?

These are tough questions. But the good news is that many successful businesses have survived this kind of transition with flying colors. You can do it too. All it takes is a strong transition strategy.

Oh, and…start early! The surest way to business growth success is giving your team the time and space they need to figure things out. This is just good leadership: giving your team the tools they need to plan for the many aspects of your business that will shift as you move to a bigger playing field.

Big Picture Questions

The following questions will serve you well as you make the transition from a small player to competing on bigger and bigger stages:

1. Where do you want to be?

You’re growing. That’s AWESOME! But what is your vision for success in 1 to 3 years? It might be tempting to plan further out, like 5 or 10 years, but I’m not a huge fan of going beyond 3 years. There’s just so much that can change in your business, the market, the competitive set, technology, etc.

That’s not to say you can’t or shouldn’t have a long term view. But when you sit down to think about your investment strategy and near terms actions, it’s best to keep 90% of it focused within a rolling 3-year timeframe.

So, where do you want to be? Start there and work backward.

2. Who are you? What do you want to be known for?

And as for your special sauce, this is a great time to get clear about it. Keep in mind sometimes what we think is our special sauce isn’t really that special to our customers and partners. This means talk to your clients, your business partners, your employees…ask almost anyone you can think of what makes your business really unique. Ask them to get specific.

Also, steer clear of boilerplate marketing speak and boring platitudes. For example, way too many businesses say, “our people are our differentiator.” But the fact that EVERYONE says this means it’s not true. No business worth their salt is going out there and hiring unqualified people. It should go without saying that you’re hiring the best and brightest that you can get your hands on!

So, what is it about what you do with your team that makes you unique? For your customers, it could be that you always return their calls quickly. Or that you have a process for onboarding that allows them to hit the ground running. For your investors, maybe you’re offering the chance to expand their portfolios in a particular direction.

3. What do we need to get there?

Are there gaps in talent, technology, or process that you will need to fill in the next few years? Have you thought about all the ways that business growth will require your team members to step up their games? Are you prepared to support leadership as they learn how their jobs and relationships will change?

One of the key aspects of a successful transition is being open to seeing shortcomings and accepting where creative solutions are needed. If you aren’t actively seeking constructive criticism along this journey, you are asking to be blindsided. So, start assembling that team of rivals and ask them to be brutally honest.

Think About What the Future Looks Like

One of the best pieces of business advice I’ve heard is “dress for the job you want.” This is another way to say put yourself in the mindset of where you want to be. When a business is transitioning to become a bigger and (hopefully) better version of itself, the same principle applies.

Here are some ways to put yourself and your team in the mindset of where you want to be:

Identify your audience: Now that you’re moving up, your customer set may change. You may be working with new clients who have larger budgets (and expectations that go along with those big numbers). Even your current customers’ perceptions will likely shift as you graduate from small business to large business. Identify their priorities and tailor your sales and marketing approach to their needs.

Shift your competitive set: As you grow, your competitors change too. This is particularly true when moving from a small business that benefits from set-aside budgets and contracts to a large business that is competing in a full and open market.

As you think about your new competitive set, take a good hard look at:

  • Your competitors’ current client lists, testimonials, reviews.
  • How they characterize and position their service and product offerings?
  • How they market themselves (e.g., website, public statements, corporate overview, social media, thought leadership pieces, etc.).

You aren’t doing any of this because you want to copy or steal their ideas. But to stand out from the crowd, you need to know what your crowd looks like. It’s also good to assess what your clients are used to seeing and hearing so that you can stand apart while communicating in the language they understand.

Also, consider the following:

  • 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 what they need to execute their specific missions. Also, look for any gaps in communication across departments. Strategize about how to create more cooperation.

Consider your proof points: Always keep in mind that business growth is an indication that what you’re doing is working. It can feel overwhelming in the process, but if you stick to what you know, that can really help you feel more grounded. Refer back to your track record of solid performance and great results whenever necessary. Also, work with your team to establish reasonable proof points to help you assess your growth roadmap going forward.

Be yourself: Finally, it can be easy to forget who you are in this process of reinventing yourself. So remember to continually reevaluate your messaging. Make sure all of your communications reflect your company’s credibility, self-worth, and core values.

If you are asking some of these questions about business growth or anticipate moving from a small to larger business in the future, my team and I would love to help with the transition. Contact us to schedule your consultation and find out more about how we enable your transformation.

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successful M&A deal

Let’s Make a…Successful M&A Deal! 5 Keys to Landing A Deal You’re Proud Of

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Deciding to embark on a merger or acquisition (M&A) is one of the biggest transformations during the lifecycle of any business. Thinking in terms of resources alone, your money, time, and credibility are all on the line here. To land a successful M&A deal, you’ve got to be on top of your game.

If you focus too hard on all that’s at stake, though, you may not be in a position to make the best deal. In other words, don’t miss the forest for the trees—go in with your eyes wide open. Although it can be nerve-wracking to jump into an M&A deal, keeping the below 5 key points in mind should help you get through the process with your nerves firmly intact.

But first…let’s consider what not to do

Pushing through a successful M&A deal like acquiring a competitor or joining forces with a powerful peer is invigorating. But what’s invigorating on the day you sign on the dotted line can quickly deteriorate into something akin to buyers’ remorse if you haven’t thought things through.

Here are just a handful of the mistakes we’ve seen get in the way of a successful M&A deal:

  • Companies WAY overpaying for what they’re buying
  • Leaders forgetting that cultural fit between companies matters just as much (if not more) than securing cutting edge technology or getting a contract
  • Too little too late: companies being slow to consider market shifts and jumping in too late to address their gaps with M&A
  • Not considering the bigger corporate story—big, expensive “surprises” that don’t obviously fit are a tough sell and put you on the defensive with investors, customers, etc.
  • Failing to communicate with all shareholders. Remember, those little shops can band together to become an activist consortium

To avoid adding to this list, consider engaging a team who can lead you through any necessary course corrections. At Audacia Strategies, our core competencies revolve around helping clients consider their bigger corporate story and communicating with shareholders when making big, bold moves like this. You can also make sure everyone checks her ego a the door, by considering the following:

5 Keys to a Successful M&A Deal

1. Deal Fever Is Real.

You and your team have spent late nights, long weekends, blood, sweat, and tears pursuing this deal. You have done all that great valuation work to come up with a fair acquisition price. And now, you’re at the negotiating table (you can almost hear “Eye of the Tiger” playing in the background). And, you’re bidding against other firms… and the price is going up, and up, and up. It’s very easy to get caught up thinking, “I’ll show them. We’re going to win this thing at all costs.” It happens All.The.Time.

Successful M&A DealThe reality is while it’s good practice to come to the negotiating table with a valuation range that you’re willing to pay, it doesn’t pay to start warping your analysis just to “win.” This is how companies end up with massive write-downs a few years after a deal when they can’t achieve the value they needed to make the price they overpaid work.

It may be obvious, but even large companies are susceptible to deal fever. Want an example? See also:

Why does this happen and how can you control for it? Well, the short story is: all business deals are closed by human beings and the decisions human beings make are often influenced by emotional and psychological factors. Executives on both the buy side and the sell side can get caught up in their perception of the company and the management, for example. So, if you feel tensions running high and fear that you or your team are losing touch with your real goals, don’t be afraid to step back from the negotiating table to catch your breath or even walk away from the deal entirely.

Ask yourself:

  • What are the stories we’re telling ourselves?
  • How can we challenge these stories to get to the real story?

And remember Dan Doran’s advice: “Value is analyzed. Price is negotiated.” It’s crucial that you build your own valuation model, one that you’re completely comfortable with and can explain to stakeholders if (or when) challenges arise. One of the worst things you can do is rely on a target’s (very pretty, but very likely) biased projections. Do your own research. Do the work.

2. Due Diligence Is A Lot Like Going To The Dentist.

It is not glamorous, but it is necessary. Due diligence can be the difference between a successful M&A deal and one that feels like getting a root canal. To make this work for you, go beyond the financials (after making sure they work and are coherent, of course!) to really understand the logic behind the deal on every level. You need to consider carefully the reality of your team’s ability to create (or “unlock”) value in bringing two (or more) firms together.

3. Customers Matter.

Once you have your head wrapped around the business valuation and the inner workings of this new mash-up of a business being born, you’ve got to think about relationships external to the organization. Get into the weeds about how strong the current customer relationships are and how they affect the bottom line.

Ask these questions:

  • How much of current revenue depends on repeat customers vs acquiring new customers?
  • What is the cost of acquiring a new customer?
  • How strong is the current business pipeline?

4. Get Real About Your Competition.

You definitely want to take a look at where your target stands when it comes to market share, revenues, and profit, but also dig more deeply. Keep in mind, you are proposing a potential shake-up of the market here. Even if they’re tough to predict, consider all the ways in which this bombshell of a deal is going to have significant ripple effects outward.

Ask these questions:

  • Where in the value chain is your target excelling? Failing?
  • What changes can you realistically make to capitalize on strengths or cut the dead weight?
  • How do they stack up against their peers?
  • How do you expect competitors to react to a combined firm?
  • Will you have the wherewithal to combat a price war for example?

5. The Problem With “Synergies.”

I can’t really remember if Professor Mariann Jelinek shared this pearl of wisdom with us on the first day of my strategy class at The College of William and Mary, but she definitely shared it early and often: “When someone says ‘synergy,’ hold onto your wallet.” Throughout my MBA program and even to this day, I think no truer words have ever been spoken.

As a buzzword, synergy is overused and honestly, a red flag in most cases. Like pretty wallpaper covering an ugly stain, “these teams have a lot of synergy” is a pretty-sounding way of saying very little. As easy as it is for deal participants to get caught up in the possibilities and truly, badly, deeply underestimate the time it will take to achieve whatever they’re dreaming of, it’s equally as easy to overestimate the value of both cost and revenue synergies.

In the rush to eliminate redundancies and expand market share, a lot of details can get overlooked about what the new procedure will look like. Slow down and think things through at each stage.

Ask yourself:

  • How are we going to make more money by putting two firms together?
  • Do we have a crackerjack post-acquisition integration team ready to put our plan into action?
  • Do we have a good sense of what might go wrong in this integration? What’s our worst-case scenario?

Yes, there is a lot at stake when you’re spearheading what could easily be the biggest deal in your company’s history. But you can handle it. You’ve done the work and now you’ve got these 5 keys in your pocket. So you’re ready to seal that successful M&A deal.

Have questions? Want to talk through your deal with an experienced team? Audacia Strategies is here for you. We’ve helped businesses successfully navigate M&A deals and other big transformations. And we’re fun to work with! Contact us at info@audaciastrategies.com or give us a call at 202-521-7917 to schedule a consultation.

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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

US election and stock market

3 Things to Remember When the Stock Market Responds to the US Election

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Raise your hand if you’re ready for the US election to be over. I know, me too. But, as tired as we are of the vitriolic finger pointing, cringe-worthy Facebook posts, and waking up to new scandals (and non-scandals) every day, many are terrified that the worst is yet to come. Could we wake-up on the morning after the US election to a plummeting stock market?

In keeping with our theme of situational awareness, there is nothing quite as challenging, from an investor relations standpoint, as a drastic shock to the market. However, if you know your company and you know your competition, you will be in better shape to weather whatever storm is brewing. In this final installment of our series, we’ll discuss three ways to know the market so you can prepare for the worst-case scenario.

Why are stock speculators feeling spooked about the US election?

We know financial markets respond to geopolitical events. For example, if this summer’s Brexit vote is any indication of what’s in store for us after the US election, we could be in for a wild ride over the next few weeks. After the Brexit vote, the British pound collapsed and global stock markets plummeted.

What is the economic explanation for why black swan events like Brexit or the terrorist attacks on September 11, 2001 cause stocks to fall? Basically, increased uncertainty about the future means more investors get out of than into the stock market during a certain period of time, which leads to falling stock prices.

So how could the US election lead to a significant stock selloff? It’s all about uncertainty.

Think of it this way: If Donald Trump wins there will be a lot of uncertainty. How will our allies and adversaries around the world respond if Commander In Chief Trump pulls us out of NATO? Will Trump’s promises to deport undocumented workers and build a wall on the Mexico-US border spark widespread protests?

While most policy wonks agree that a Hillary Clinton victory would have a stabilizing effect on the aerospace and defense market, the US has never been so politically polarized. Not to mention that if the popular vote is close and the election is contested, the result will be increased uncertainty. Too much uncertainty makes investing in the stock market feel closer to gambling, so risk-averse investors will simply choose to save their money rather than risking it on an uncertain future.

How do you deal with your investors if the worst happens?

While it is impossible to prepare for all that could go wrong, if you have maintained that “ready stance,” you will be more confident when you explain to investors what steps you are taking to make the best of a bad situation. And your investors and analysts will appreciate a thoughtful message delivered confidently, particularly when others are reactively grasping at straws.

Follow these three pieces of advice whenever markets behave badly:

1. Stay engaged

When scary things happen to us, our first instinct is to curl up in the fetal position (if not literally, then figuratively, which can be just as bad during times like these). But we need to do what we can to resist this paralyzing instinct.

The most productive thing you can do if the markets are volatile on November 9th is stay engaged. It will be difficult to pick up the phone and talk with investors, but accept that while you may not have all the answers, investors will feel better if you tell them what you do know. And remember to return to our discussion about knowing your business and how it fits into your broader market.

So, do your homework, get the facts, stay in touch with your team, and be ready with a game plan as quickly as possible. All investors can ask of you in times of uncertainty is that you are candid and timely in your assessment of the situation. This is not a time to read the tea leaves or speculate.

2. Be transparent

When you speak with investors and analysts after the US election, be transparent. As tempting as it is to sugarcoat or avoid tough questions from investors, now is not the time to be evasive. Be candid about what is known and unknown. Return to what you know about your company, your strategy and your competitive landscape.

A big drop in the stock market affects everyone. It does no good to pretend that your company or industry is magically better off than every other company or industry. So be honest.

Your investors look to you to tell them what is rational in this frightening time of uncertainty. They look to you to set their expectations. So you need a gameplan. Your job is not to be a cheerleader. Your job is to provide as much clarity in an uncertain situation as possible.

3. Go back to fundamentals

When a catastrophic event occurs causing a huge shift in the market, return to fundamentals. Analysts will develop complex models that attempt to take into account outliers caused by highly improbable events. But often their views will contradict. It’s important to that you remain aware of the incoming information, clear-eyed in your assessment and rational.

Take a deep breath and consider what has changed and what hasn’t changed about your industry. Get your team together and discuss whether your strategy should change. Sometimes it makes sense to ride it out. If you stick to your message and core values, you will be in the best position to guide investors in their decision making.

Also, don’t ignore your intuition. Often when markets behave badly and unpredictably, the usual models fail us because circumstances are unusual. In these difficult times, those who ignore the old models often come through the crisis best.

I’m optimistic that the great experiment that is America will survive the 2016 presidential election. But the fact is that we are living in volatile times. Do you have clear procedures in place to keep your strategy moving forward when the unexpected occurs?

If you need help staying up on shifting markets, let Audacia Strategies be your port in this storm. We can guide you through developing a consistent, strategic message to communicate to your investors. Schedule your FREE consultation today (before or after you vote).

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