Maximise M&A Value – Get the Insider’s View from Three Professional Services Industry Experts

Successfully preparing for mergers and acquisitions (M&A) can be tough, especially if you’re unsure whether now is the right time to buy or sell – or if the risks outweigh the rewards.

It may be that you’ve reached your peak growth potential, or maybe you want to acquire that start-up’s remarkable new intellectual property (IP) that everyone is talking about. Whatever your intention, a successful merger or acquisition demands flexibility and care to maximize its value for both parties.

We invited three industry experts to share their practical advice with Deltek’s Senior Vice President of Corporate Development and Product Alliances, Pete Mann, in our webinar: Maximise M&A Value Creation: The Insiders’ View.

Here are some key highlights from the discussion, including insights from Fiona Farrell, Finance Director at Publicis Dublin; Paul Boland, Finance Director at Optimised Environments (OPEN); and Jerome Gylnn-Smith, Managing Director and Head of European Business at Equiteq.

Identifying The Right Time For M&A

We asked our experts if there is ever an ideal time to engage the market as a buyer or seller.

“Timing depends on two key factors – internal and external,” says Jerome. “Internally, you must ask if acting now will drive growth, provide new opportunities for your people, and offer shareholders the right incentives. If you’ve reached a natural peak in what you can achieve alone, then chances are, the time is right.”

Fiona and Paul both agree that external macroeconomic trends are out of your control – and accepting this can help you focus on what is right for your business in the here and now.

“OPEN was approached twice during the pandemic by SLR for acquisition, and we turned them down both times,” says Paul, “But that didn’t stop them from returning a third time, and we realized that COVID wasn’t going to stop their strategy. We said yes for the good of the business, and it was a success.”

Fiona adds that flexibility is key here, as you must be ready to act when an opportunity presents itself. For example, if there’s a break in your lease coming up, take advantage of it before you enter another long-term contract that may diminish market interest. And if the market is working in your favor – trust your instincts before it’s too late.

“Market trends come and go, so if you’re holding out on a better deal, you may miss the boat,” says Fiona. “And remember, deals take a long time, so avoid closing at the end of the year. You still have a business to run and a life to live – and nobody wants to think about M&A while eating Christmas dinner.”

Timing is important, but you also need a strong value proposition to attract businesses, build rapport as a known commodity, and reduce the risk of a false start.

How to Optimize Your M&A Go-To-Market Strategy

An organisation’s go-to-market value is key to helping potential acquirers understand where it may fit in their portfolio.

When asked what businesses can do to optimize their value proposition and reduce risk from the buyer’s perspective, Jerome says: “Acquirers don’t have clients; they have targets – so put yourself on their radar and build active relationships with their decision makers. This can help turn a potential transaction into a certified sale.”

Developing or acquiring original IP is another great way to maximize value, but not every owner will want to sell – especially if it’s a small team just getting started. In that case, you can lay the foundation for a more lucrative deal by partnering up, giving both parties the time to build a relationship and assess the value of an acquisition later on.

“IP is important for creating value, and it can make you more attractive to buyers,” says Fiona. “It can be bought, scaled, and sold, creating recurring revenue. If you don’t feel that is the right approach, you can always look at licensing the technology or partnering up to access its benefits without performing an M&A.”

What’s more, aligning your shareholders around equity value or a clearly defined business benefit can also help reduce risk and drive momentum.

“Companies that perform multiple successful deals and flip businesses tend to be aligned around private equity,” says Jerome. “Everything they do is for the next deal, and that equity value is how they compensate their shareholders and drive growth. But above all, aligning your teams around a clearly defined vision is crucial to M&A success.”

In most cases, it’s the finance team’s responsibility to create value and steer the deal to closure – but what does it take to please both sellers and buyers?

The Role of Finance in M&A Orchestration

From the buyer’s perspective, your finance team plays a significant role in calculating the figures, measuring success and sourcing the appropriate funding.

“The finance director must identify value in the deal, calculate the synergies, and set targets, KPIs and soft and hard metrics to measure it by,” said Fiona. “Once you’re in acquisition mode, you’ll always have a list of targets and gaps you want to fill and will spend a lot of time assessing value and sourcing finance through debt funding, private equity, or reserves.”

From the seller’s perspective, finance is responsible for preparing the organization for the due diligence checklist and drilling down into the data to get the required insights for a swift completion.

“In 2021, OPEN was acquired by SLR with help from KPMG, who sent us the due diligence checklist,” said Paul. “It goes into an extraordinary amount of detail, and it felt like we were getting audited – every time I sent off our answers, we’d get another 16 questions back. Thankfully, we have a great system with Deltek’s ERP, which helped us drill down into our data and provide KPMG with the needed information.”

The due diligence checklist can come as a shock to many businesses, and potential buyers will look into your business in ways you’ve never experienced before. But working with the right data management systems can help you provide the quality insights your buyers want to see while easing the pressure on your team.

Watch The Full Discussion for More Insider Tips

Deltek’s Pete Mann summed up the important areas professional services firms need to focus on when going through the M&A process. “For those looking to sell, a clear go-to-market position and value proposition are key, and working on developing relevant relationships in the industry can make generating buyer interest easier.” He continued, “As the M&A process gets underway, having the right systems in place to be able to gather the information needed during the due-diligence period can help everything progress much more smoothly.”

Once the M&A process is completed, Pete emphasized the importance of communication by both the buyer and the seller, “You cannot communicate enough. The day that somebody doesn't hear from you is the day they think they're going to get laid off. It can be an unsettling time for employees, so they need to hear from you daily and have some visibility into how the companies are going to merge and collaborate. Doing things together, such as working on projects together, is the best way to demonstrate the value to your team.”

This is just a snapshot of our insider’s view on maximizing M&A value. For more expert insights, including creating recurring revenue streams and managing the post-M&A period, watch the full webinar here.