Originally appeared in WashingtonExec on May 17, 2017
There’s no shortage of merger and acquisition GovCon events in and around D.C. But good ones are a bit harder to come by.
This week, there was a good one, featuring several industry heavyweights who hit the mark on both the art and the science of a successful deal. USI and Aronson hosted “The M&A Process—What to Expect When You Begin,” a panel discussion moderated by Jeffrey Verity, vice president of USI’s GovCon practice.
Value of Patience for the Right Deal
“Patience is a virtue required by both the buyer and the seller,” advises Scott Goss, president and CEO of Preferred Systems Solutions, Inc. Goss should know. He’s been on both sides of M&A deals. It typically requires even more patience to execute what experts call a transformational deal. That is, it’s part of a long-term strategy and achieves many, diverse objectives for the acquirer. It’s not just a tactical bolt-on.
Importance of Timing
Combining two companies isn’t simply an exercise in blending complementary assets. The merger needs to make sense for the market today and into the foreseeable future. ECS Federal Chief Financial Officer Tom Weston pointed out the “change in administrations delayed some deals because buyers were assessing what impact the new administration would have on agency customers of the acquisition target, especially if they supported certain civilian customers.”
Having worked with dozens of government contractors going through M&A transactions over the years, here was my big takeaway: an increased effort to save the talent. Normally, leaders mention talent and management team retention, but hasn’t always been a top priority. Today’s panel emphasized it’s now more important than ever to the long-term success of the deal.
In fact, in many cases, acquirers want to integrate the CEO and leadership team into their organizations. Employees feel more loyal when they see their executives playing a significant role in the new entity, so retaining key leadership supports employee retention as well.
Now an M&A consultant, former CFO of Constellis Doug Lee stated: “Buyers are purchasing three main things: customers, capabilities and talent.” To retain key employees, Rich Sawchak, CFO of Novetta Solutions, stressed: “Buyers and sellers should start working on their communications plan on day one of the deal. It can’t be an afterthought.”
What’s in a Name?
One topic rarely covered in these panels is what to do with the name and brand of the company and products you just purchased.
There’s no rule that fits every acquisition. Company names and brands are assets in the deal, deserving rigorous and diligent evaluation to inform a solid business decision about how (or whether) to use them. It can’t be an emotional choice.
Buyers need to consider the strength of the acquired brand. A strong brand could be hyphenated or co-branded using both logos. Consider the company and product brands separately. Sawchak points out he typically retains brand names when acquiring software products.
So, when do you know it’s time to change a name? Sawchak closes with this advice, “Don’t push the change, pull it, with a customer-centric focus and employee training and development.”