Board Mergers & Acquisitions Best Practices

The best boards know that every market participant could be a potential candidate for future M&A.

Mergers & acquisitions (M&A) activity will come up at some point for most directors serving on private company boards. It may arise in the context of potentially being acquired or acquiring a company, changes to supply chain or customer companies, or private equity/venture strategies across markets. Here are a few best practices developed from reflecting on patterns seen across dozens of transactions ranging from financial software to industrial manufacturing.

Consider all partners as potential M&A channels. Companies can go from customer to competitor to acquirer (among other roles) unexpectedly, requiring a thoughtful approach when sharing proprietary business strategies or data beyond signing mutual nondisclosure agreements. Boards can advise the management team to share only necessary information with external partners and stay aware of potential conflicts of interest. For example, I navigated a scenario in which “Company A” learned that its investor, a large financial corporation, bought one of Company A’s competitors with similar software products, resulting in a need for cautious information management at multiple levels of organizational interactions. Strategic boards keep M&A in mind for both opportunities and risk management.

Upstream and downstream acquisitions can solve pain points. If the company is pinched by a supply issue — such as consistent, inadequate delivery of a component or services — consider purchasing a supplier or intellectual property (IP) rights. For example, Group 14, a fast-growing silicon battery company, requires silane gas as a critical input to its production. It purchased German company Schmid Silicon to better manage geographic supply risks and has secured federal funds to build its own U.S. plant to generate the feedstock material. It’s possible to structure a fund-raise for a target acquisition that closes concurrent with the deal. For software supplier challenges, a limited acquisition (a division or service line of a company) can be feasible, akin to hiring a few key personnel with IP transfer terms.

Data room diligence. Ensure the management team maintains thorough, accurate records of corporate forms and activities. A competent CFO and general counsel team will have a robust process in place to capture and manage key documentation well before M&A transactions. The more the books are in order, the faster and less burdensome the M&A process will be. Piecing together data room items during a transaction results in delay.

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Highly coordinated communications. Leadership alignment is critical for a successful transaction. Henry Albrecht, CEO and founder of Limeade prior to its acquisition by WebMD, advised: “Define clear roles for the CEO, your investment banker and (only if necessary) one member of the board, e.g. the chair. It is incredibly easy to destroy trust in the process, and even create suboptimal outcomes, if the board is not totally aligned not just on the desired outcome, but on the cadence, content and communicator in the process.”

In today’s emerging markets, it is key to consider M&A as part of company growth. The strategy may evolve toward consolidating, spinning out, acquiring critical path components or otherwise. Board members can maintain awareness that opportunities may come from unexpected partners at surprising times. Keeping in mind that every market participant could be a candidate for future potential for M&A activity can position the management team for smart, strategic commercial engagement.

About the Author(s)

Amy Bann

Amy Bann is a director of E8 Angels and BioCoTech Americas Inc., an advisory board member of Millpont, ERS, Sabacica Capital and a former Fortune 500 corporate sustainability director.


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