The Football Fan’s Guide to M&A Transactions

With both college and professional (not to mention fantasy) football in full swing, we find many conversations with clients drifting to topics from the gridiron at this time of year.  Given that many of us are devoting a significant amount of our personal time to following our favorite teams, many times business points are best illustrated at this time of year by using football analogies.

Certain sports agents have posited that the highest achieving football coaches could easily run Fortune 500 companies but instead chose to coach football for a living.  While that point is debatable, we can certainly draw from the talking points of today’s best coaches in setting a framework for approaching a merger transaction.  While we can’t deliver Nick Saban, Bill Belichick, or Kirby Smart to your boardroom, use these sound bites to your advantage in setting the tone for how your board addresses an M&A transaction.

1. 1. Trust the process. “The Process” has become a hallmark of the University of Alabama’s championship dynasty.  Coach Saban focuses on the individual elements that yield the best results by the end of the season.  Similarly, a well-planned process can be trusted to yield the best long-term results.  This simple point is among the easiest for boards to miss.  We are often concerned when clients engage in “opportunistic” M&A activity.  Instead, we prefer to see a carefully planned process that includes the following fundamental elements:
      * Parameters around the profile that potential partners should have, including market presence, lines of business, and size;
      * Clearly defined financial goals and walkaway points; i.e., those metrics beyond which no deal can be justified;
      * For sellers, the forms of consideration that will be acceptable (i.e., publicly-traded stock, privately-held stock, or cash); and
      * Selection of qualified advisors.
   2. Self-scout. Great football teams have an honest self-awareness of their strengths and weaknesses and grasp them on a deeper level than their opponents.  Buyers and sellers should also have a frank assessment of their shortcomings.  In planning for the M&A process, those weaknesses should be addressed in advance to the extent possible.  To the extent they cannot be fixed in advance of embarking on an M&A process, parties should provide a transparent assessment of their weaknesses to potential partners.  Doing so enhances credibility and builds trust in the other facets of due diligence.
   3. Know the tendencies of your opponent. On the other side of self-scouting is a great team’s ability to understand and address the weaknesses of its opponents.  While we never advise clients to think of M&A partners as adversaries, advance due diligence of a potential partner to identify their needs can certainly help lead to a successful transaction.  At its core, a good M&A transaction is about giving a potential partner something it does not have and cannot build for itself.  To the extent that parties can identify the needs of potential partners in advance of their initial conversations, they can speak directly to those needs at the outset, thus positioning themselves as an optimal partner in a crowded M&A field.
   4. Never stop recruiting. In the wake of the 2018 college football national championship game, it would have been easy for Alabama coach Nick Saban to celebrate his fifth national championship for a week or more and for Georgia coach Kirby Smart to dwell on the few plays that cost his team a title.  Instead, each coach was immediately back to work recruiting to build and replenish the talent on his team.  Recruiting (and retaining) talent is just as important for parties in the midst of an M&A transaction.  While M&A transactions can provide many benefits to the parties involved, they always tax each employee base, typically resulting in unplanned departures.  Management teams and boards should focus heavily on rewarding efforts of employees involved in integration, on retaining critical employees, and on recruiting new talent to maximize the opportunities offered by M&A transactions.
   5. Keep the main thing the main thing. It seemed as though each player and coach on the University of Georgia football team had been brainwashed with this mantra prior to the team’s victory in the 2018 Rose Bowl.  While the phrase may sound a bit strange, it is hugely important in an M&A transaction.  The details of due diligence and legal negotiation are important, as are discrete financial negotiations such as executive compensation.  However, boards and management teams should not allow a focus on those details to override their fundamental goals in pursuing an M&A transaction (which have been established clearly through “The Process”).  Some of the best long-term deals we have seen involved concessions by the parties that were quite unpalatable in the midst of the transaction.  However, being willing to make those concessions in view of the larger picture of the deal allowed the parties to unlock value in the transaction not otherwise available to them.
   6. Attack the Deal. We are fairly certain that Georgia strength coach Scott Sinclair never intended his “Attack the Day” motto to be translated for business transactions.  With that said, it is valuable for parties to M&A to meaningfully advance the transaction at every opportunity possible.  Time is generally not a friend to deals, and a loss of momentum can be fatal to a transaction.  On the other hand, if a deal cannot be struck, it is useful to each party to reach that conclusion as soon as possible in order to move on to other business objectives.

   While sports and military analogies are often overused in business, we hope that these points help officers craft a relatable narrative for board members analyzing M&A transactions.  And, in case it isn’t obvious from the points above, Go Dawgs!  [Editor’s Note:  I can’t believe I’m publishing this blatantly partisan endorsement of that school.]

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