Dear Board, CEO, Founder and Chief Marketing Officer,
What role does your CMO play in evaluating M&A decisions? I was not surprised to read that the M&A market for 2010 and expected for 2011 is being lead by “Strategic Buyers”. A strategic buyer is a company that is ultimately looking to grow its business and has come to the conclusion that it is cheaper to purchase/merge than it is to do it oneself or outsource. In your organization, is your CFO or CMO leading the charge on determining your growth strategy?
According to the article, “Although the M&A market has been subdued in 2010, the author has seen strategic buyers pay strong prices for carefully considered acquisitions. “In addition to the distressed deals, there have been acquisitions by strategics who are looking for niche, highly synergistic businesses…” he says. “These corporate buyers are looking to buy a technology to leapfrog their competitors or add a product line that will make them more competitive.”
A CMO has 3 roles in an M&A transaction that leads to growth:
- Front-End Needs Analysis
- Culture Fit and Strategy Alignment
- Operational Analysis
Front-End Needs Analysis: A CMO better be leading the charge on the front end to determine IF a company should build, buy or outsource BEFORE the CFO, Board and Management Team decides to merge or acquire. Those companies sitting on cash that want to take advantage of this market can choose to invest it to improve the operations and/or replace old assets (increase efficiency), invest it in internal growth (the marketing budget), or invest it in M&A activities. The CMO must be working closely with all parties to communicate to the management team, CFO and Board that the company needs to look outside the company for strategic growth BEFORE there is an opportunity.
Culture Fit and Strategy Alignment: A CMO also has the responsibility to protect the culture and company’s focus by making sure an M&A transaction is inline with the vision and future plans of the company (not a one off hail mary) and the cultures are a fit. Otherwise, the “good deal” becomes the pit of despair.
Operational Analysis: Finally, the CMO must understand and evaluate whether the operations can improve as a combined entity. Throwing an M&A transaction over the wall to the operations team is not fair play. In fact, in some organizations, the CMO’s team is responsible for evaluating and modeling the true costs of implementing an organization into the current company. Whether it is the marketing team, finance team or operations, the marketing executive must be willing to sign off that the transaction will drive the expected growth, drive the expected profitability and drive the expected cash.
What do you think? And why is M&A a CFO discussion and rarely finds itself into the marketing trade publications?
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