How M&A in digital times changes when the need for the next new technology or digital capabilities commands the deal.
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M&A strategy with a digital lens
To win in this changed environment, Consumer Goods companies need to do a few things right when crafting an M&A process for the digital world.
- Start with an explicit strategy that defines how digital will fit in. For example, is the goal to have digital products and services? Create digital wrap-arounds for enhanced experiences? Better leverage information for insights? Digitize elements of the value chain? Or, is it to create a disruptive play altogether?
- Retool the search process. Target ideas may come from research universities, patent searches, partners at venture capital firms and many other non-traditional channels. Increasingly, the technologies are new, highly specific, and not yet fully tested for viability. Small brands may be hyper-local. Finding these opportunities is not as simple as developing deals with other well-known large companies.
- Tailor approach to valuation. Traditional valuation models can break down because they were not built for digital assets, and competitors may be in a position to apply the capability more broadly. This can potentially force a fallback to strategic value, grounded in the vision for the broader play the organization is making. It can also indicate when partnering might be more appropriate, at least as a first step.
- Map the value in multiple plays. Plays into an emerging space are rarely a one-and-done event. Rather, they usually require stringing together multiple acquisitions into one coherent capability for the acquirer. Be strategic when mapping forays into emerging areas.
- Don’t underestimate the importance of the right human capital. Keeping entrepreneurial types engaged is a key element to healthy M&A innovation. There is no one-size-fits-all approach that works, so look to tailor to fit aspirations and skillsets.