Guest blogger: Jay R. Grant is SVP & assistant general counsel at Univision Communications, Inc. He serves as the legal department representative to the Office of the Chief Executive Officer in New York, and provides integrated legal and business solutions for Univision’s current and new enterprises.
One, two, three … Voilà! This is the speed at which we hope new enterprises become accretive to cash flow — whether it involves organic (build: development-to-launch) or inorganic (buy: M&A) development. In an accelerated digital world, where Google averages more than a deal per week[1] the market expects instantaneous deal completion, integration and profit.
The strategic advisor (e.g., a legal, deal-making, investment-banking or strategy-operations professional) has changed emphasis to meet this expectation. Deal completion is only one element of the process. Deals that optimize for immediate integration into the existing enterprise have become new competitive advantages for leading firms. Accordingly, strategic advisors must deliver results that best position their client’s enterprises for frictionless launch and integration, in rapid fashion. This is best accomplished by remembering that “Voilà!” is not only the client’s expectation but also the mnemonic describing four advisory steps: Vet, Optimize, Integrate-Logically and Accelerate.
Vetting
Due diligence has historically been a defensive imagining of worst-case scenarios. Yet, increasingly, advisors must think in terms of offensive-play. Diligence is the phase in SWOT analysis for organic launches or M&A deals that allows advisors to envision the full potential of the new enterprise. For example, new media companies acquire enterprises in satisfaction of four needs: talent, technology, product and market share. Prioritizing these needs enables the client to assess acquisition/launch enterprise value. In the case of organic development, this process involves intellectual honesty about whether internal development is achievable and accretive, given the company’s core competencies and resources.
You are the strategic advisor. Consider the following:
- Have you focused the client on which of the four needs is driving this deal?
- Have you fully assessed your client’s capabilities?
- Have you articulated the source of competitive advantage that is the driver for this deal and put it foremost in the process?
Experts from Knee, Greenwald and Seave,[2] to Czepiel[3] have detailed the true sources of competitive advantage. The challenge for the strategic advisor is retaining intellectual discipline when advising the client as to the best choice.
Optimizing the deal for resources
Strategic advisors optimize the deal/launch based on available client resources for bringing the enterprise to fruition. This involves pairing capabilities with resources. You may be acquiring talent, technology or product, but this is pointless if it comes at an exorbitant cost or negative net present value.
Consider the following:
- Is there a tax solution?
- Is there a legal entity with a preferred protection?
- What about the structure can be customized for the unique nuances of your client’s business?
The deal need not be cookie-cutter. Remember: your job is to optimize the structure of the launch/deal to your client’s customized path to success.
Integration with logic
You effectively optimize structure when you decrease friction in the integration process. Integration of a new enterprise into the existing family can take months or years. This depends on the logic applied to the task. Consider the following:
- Is the company trapped in silos?
- Is there structural inertia?
- Will the new enterprise be greeted as an energizing catalyst or as a virus to be attacked by vested stakeholders?
Technology leaders like Google, Facebook and Apple often field dedicated integration teams for launches and acquisitions because the pace of technological competition reduces the margin for error during transition.
Can an engineering culture ingest a sales-driven enterprise? Strategic advisors are critical in determining the answer to these types of questions. Integration requires logic, diplomacy and determination. Corporate integration requires Brown v. Board-like “all deliberate speed.” Integration should be done with priority but it requires thoughtful deliberation. In some ways, this is oxymoronic. There is inherent tension in requiring disciplined logic to move at a quick pace.
Acceleration
Accelerating the launch/deal to make it rapidly accretive gives your client its “Voilà!” result. When analyzing acceleration options, ask yourself:
- How quickly can the fully vetted concept (having been optimized and integrated logically into the enterprise) achieve its best cruising speed?
At the early stage, strategic advisors regulate or throttle that speed. Vollmer, Springs and Hawkes have encapsulated this as the “hurry-up offense.”4 Ramping up the pace of the enterprise from integration to cruising speed comes with manageable, achievable targets, and a sufficient stretching of skills on the part of both the new enterprise and existing company.
Strategic advisors’ intimate knowledge of optimized structure and integration history makes them integral components to the ramp-up. As engineers of the frame, advisors gauge if the pace will rattle and strain the framework, or if the enterprise and company are sufficiently malleable to achieve the new pace. These four reminders keep advisors on track for speedy, accretive enterprise development … V.O.I.L.À!
[1] Google completed 57 deals in 2011 and 48 deals in 2010, as reported in the New York Times, Oct., 27, 2011: http://dealbook.nytimes.com/2011/10/27/google-hits-new-ma-record/. Zynga averaged 15 deals in 2011 — over one per month. Wall Street Journal, March 22, 2012.