Credera helps C-level leaders plan for and achieve their unique strategies. This includes helping companies navigate the sometimes daunting waters of mergers and acquisitions (M&A). Recently, Credera acquired DMW Group, an outstanding consulting firm with offices in London, Leeds, and Manchester. This provided a great opportunity for us to practice what we preach regarding M&A. If you’re like me, you want to know the punch line up front. Here it is: M&A lives or dies on people and culture – not framed words on the wall, but the real-life, flesh and blood people and their collective core values.
Let’s take a look at the process we used to successfully connect with DMW Group, a firm whose culture, leadership team, track record of authentic care for each other and for clients, and proven financial track record all provided significant confidence, even in the face of the pandemic. In this write-up we’ll share the steps that lead to a successful acquisition and some key lessons from our experience:
Enterprise Strategy Defines M&A Strategy
Clarify the Target Profiles
Identify the Mutual Best-Fit Companies
Conduct Due Diligence
1. Enterprise Strategy Defines M&A Strategy
Credera, like most organizations, maintains and updates a multi-year enterprise strategy. This plan is the long-range, visionary roadmap for the company’s growth. Enterprise strategies answer the question: How will the firm best accomplish the goals of the shareholders? And, while Peter Drucker famously said, “Culture eats strategy for lunch,” he didn’t say a strategy shouldn’t exist.
An enterprise strategy is critical to prioritize the most likely avenues of growth. For Credera, London emerged as a high-priority target that would enable us to align with the international needs of some of our key clients. Credera is governed as a partnership, and we have a handful of partners who make up our strategy and investment executive committee. That group focuses on maintaining our enterprise strategy. As we execute our M&A strategy, the strategy and investment executive committee ensures alignment between the enterprise strategy and the M&A strategy.
2. Clarify The Target Profiles
To begin the process of M&A, it’s important to clearly define specific target profiles. Defining profiles requires focus and alignment of the investment committee. Solid effort in this phase pays significant dividends later to encourage the discipline of remaining on target and avoiding research drift by looking at too many different companies. This clarity helps quickly illuminate the non-match companies that could otherwise become time consuming distractions.
First, we documented the required ingredients of our target profiles:
Strong leadership team (preferably with some big-firm consulting backgrounds).
Track record of high-performance growth (CAGR of REV and EBITDA).
Clear path to accelerate our combined growth post-transaction.
Good size fit (e.g., number of people and offices, revenue, profit, etc.).
High quality consultancy with high client satisfaction.
Track record of strong digital transformation, consulting, and technology solutions.
Next, we leveraged our criteria to define clear target profiles with clarity on the geographic prioritization from our enterprise strategy:
Boutique consulting firms similar to Credera, in new geographies.
Boutique consulting firms similar to Credera, with industry expertise in industries we don’t typically serve.
Channel partner consulting experts (i.e., Microsoft, Snowflake, Google, SFDC, Adobe, etc.).
3. Conduct Research
After we outlined our templates and parameters, we began the research phase, identifying companies that appeared to fit the specific target profiles and related criteria. We ranked the information based on Glassdoor, Great Place to Work Institute, Forbes, and other noteworthy sources that hinted at better culture. We keep detailed spreadsheets with our own assessments and criteria scoring. We scored approximately 100 companies and continually ranked and re-ranked them throughout the research process.
Next, we began reaching out to CEOs directly. During the initial discussions, we tried to understand the cultural alignment and validated key points of publicly available data. If those conversations went well, then we instigated mutual non-disclosure agreements to protect confidentiality for our firm and the target firms. Then we entered into deeper discussions with a handful of companies.
One pivotal moment occurred as I was driving between meetings in Dallas, when Chris Dean, CEO of DMW, called me back. I pulled my car over and Chris and I talked for a good 30 minutes. Since we had both been at Andersen Consulting years ago, the common background made for an easy initial discussion. We shared about each firm. He explained that they were not for sale at the moment, but they’d had an investment from a private equity firm a few years prior. We continued to talk and when we were done, I had about five pages full of notes.
My overall impression was that the cultures were a great fit, the track record of growth was a great fit, the geographic locations were a great fit—checking off basically all of the criteria. Looking back, we both had a strong sense during the call that if we could align on some key deal points and timing, this might be the beginning of a great adventure!
4. Identify The Mutual Best-Fit Companies (And Their Leadership Teams)
Over the following several weeks we made a short list of the top 10 companies we wanted to visit in person out of the nearly 100 companies on our list. We entered into more detailed conversations with all of those companies. We also invited a few of those companies to come to Dallas to meet with us in our office or we flew to meet them at their offices.
We eventually said “no” to several companies and decided to focus our time with DMW, traveling to London and New York for in-person meetings in the months leading up to the pandemic. We scheduled an intensive couple days of back-to-back meetings with DMW’s leadership team sharing specific information about their firm and about Credera and our vision for global growth. At the end of the meetings, we had dinner and the team connected on core concepts—with people and culture at the center of the discussions. It became stunningly clear that DMW had a high-performing leadership team. The financial and go-to-market aspects were important, too (but those aspects are often easier to assess during detailed due diligence).
Earlier in my career at Andersen Consulting, I was part of a team that worked on the Exxon-Mobil merger and several other global divestitures, IPOs, and mergers. Specifically, I worked on the business integration, organization structuring, and go-forward operating strategies, bridging between financial strategy through post-transaction execution. In those formative years of my career, several gray-haired mentors invested their knowledge and wisdom in me. One of my old Andersen partners emphasized over and over again, “M&A is a team sport, and everyone involved in the deal needs to win.” He talked about the importance of culture, stay-behind leadership teams, and communication prior to, during, and post-transaction.
Throughout the DMW acquisition, we constantly focused and refocused on answering the question: How do we best structure the deal so all of the professionals of DMW and Credera expand their individual, short- and long-term career opportunities while also enabling maximized growth for both companies in go-to-market capabilities and profitable growth opportunities? In addition, we emphasized good structures for Omnicom and GCP and for shareholders of all organizations involved. While it sounds complex, we simplified by focusing on people and culture, knowing that good business outcomes flow from that source. The quantitative rigor and deep dives on financial feasibility are no less critical—but it’s like two rails for the track with people and culture on one side and financial on the other. And there is great joy in the craftsmanship of a well-constructed deal that expands future growth potential for people and business.
5. Conduct Detailed Due Diligenc
After we provided indication of interest including salient deal terms, we entered exclusivity and detailed due diligence. During due diligence, the attorneys, certified public accountants, and advisors for various shareholder groups all collaborate and negotiate various legal structures and financial, tax, and other elements necessary to complete a purchase sale agreement and transfer ownership. During this stage, it is important to be transparent and collaborative. It’s also a great idea to include as many team members as is reasonable without distracting from day-to-day business. We introduced various team leaders and began the post-acquisition collaboration steps during due diligence. Deep dives on financials are critical in this phase. It’s often helpful to bring in outside CPA firms to maintain objectivity of analysis.
It’s important to document an investment thesis including the reasons for pursuing the target company. This includes the cold, hard financial facts providing proof of the financial track record and belief in the future growth opportunities, major risks, and categories of reasons the acquisition might not achieve the desired outcomes, specific actions related to a 90-day post-acquisition collaboration plan, and leadership team assessment. We like to do pre-mortems and imagine all the reasons something might fail. It gets the fear out and forces a reality-check to ensure everyone is committed to take action to drive success.
M&A Best Practices
All of these experiences highlight a few best practices:
Align acquisitions strategy in the context of people and culture, enterprise growth strategy, collaboration with shareholders, and in the context of competitive advantage in the marketplace.
Clarify the acquisition approach.
Specify the precise target acquisition attributes.
Research, research, research.
Evaluate high performers, meet the teams, and take a good look at deliverables, financials, and talk with clients.
Don’t wait—introduce team members during due diligence in all teams who will need to collaborate post-transaction.
Confirm the culture alignment one more time and always be willing to walk away from a deal unless it is a win for all involved.
Acquisitions are an important aspect of corporate growth plans and really come down to the people and culture. Credera and DMW share a common culture and it will be great to see careers and client relationships grow from this joining of two great companies.
What About The Pandemic?
The pandemic presented an initially complicating factor as it emerged halfway through our due diligence. In light of the COVID-19 pandemic, we decided to change our process a bit and slow things down. We all mutually agreed that because this was such an unusual moment in history, we needed to adjust the process to observe performance through a couple months to see how the performance-to-plan shook out. We also agreed to share our ongoing performance as another step forward in transparency.
We took steps to understand market demand through researching consumer and business trends around the world. Research proved that digital transformation is increasing around the world, accelerated by pandemic effects of remote work force and increased consumer and business reliance on digital means of interaction. Both Credera and DMW excel in the proven digital strategy and digital transformation.
In general, time kills deals, so slowing down felt really strange. However, in the end, the time only galvanized our resolve to move toward completion because DMW Group is a team of great people with great culture, and we’re glad to journey together!
We hope our experiences shed some light as you embark on your own M&A journey. Remember to clarify your priorities, do your research, and keep culture as a guiding star. If you have any questions about how to make a template for your next M&A move or want to talk your strategy through, reach out to us at email@example.com.
Special Thanks To The Many Teams Who Made This Possible
To DMW leaders: Chris Dean (CEO), Simon Greenhalgh (CFO), Helen Kilvington (CPO), Matthew Neale (CCO), and Marius Rubin (CTO).
And, hats off to our Credera teams. The Strategy and Investment Executive Committee who, along with Seema Desai, made up our internal “investment committee” during the pursuit: Justin Bell, Sandra Beno, David Dobat, Kevin Erickson, Gail Stout Perry, and Trent Sutton. During the last two months of Due Diligence, the following team met twice a week for scrums, to think through post-acquisition collaboration: Andrew Warden, Sarah Youngblood, Marleta Hansen, Jason Goth, Daniel Hulse, Phil Lockhart, Vincent Yates, Ben Mead, Ryan Walker, Alex Moore, Kevin McDonald, Cody Case, Stephanie Miller, David Dobat and Brendan McLean. Special thanks to Cody Case and Daniel Hulse and Brendan McLean – for meaningful work above and beyond, behind the scenes.
Finally, many thanks to the Omnicom teams, for believing in our initial vision and for remaining rock-solid through the pandemic.