An interview with Tom Lebamoff, Managing Partner and CEO of Exactus Advisors

What role does your firm play in mergers and acquisitions?

We provide pre- and post-merger planning and execution, serving as an extension of the management team to reduce deal and execution risks, plan and create a post-close roadmap, support the post-close execution and provide interim management support throughout all phases. We also provide pre-deal IT and operational due diligence, post-transaction operations planning and execution, technology strategy and execution.

What’s your take on the current M&A climate?

There’s been an acceleration of M&A activity in 2018, both in the number of deals and the size of the transactions. CEOs remain very confident about conditions for deal making and are continuing to plan to use M&A to accelerate their growth needs. There’s no doubt that private equity’s insatiable need to invest is increasing, and families like the Knaufs and the Reimanns are making big moves with Krispy Kreme/JAB and USG/Knauf Insulation.

What makes for a successful M&A transaction?

There are four key components. The first is a clear governance structure with dedicated resources and representation by all business functions and managed by a centralized group. The second is strong and frequent communications with internal and external stakeholders. The third is organizing the work according to company culture, skill sets, employee growth objectives, and more—not just by the deal value drivers. Finally, successful transactions leverage skilled and trusted advisors that fit into the culture to reduce the execution risk.

What are some typical reasons why deals fail?

The assumption by senior management that the team will “figure it out” and someone else can lead it because they’re too busy running the business is a common risk. Another is having incompatible cultures and deal misalignment, including confusion over the deal strategy and the resistance to deal expectations of the newly combined company. Persistence of a dual-leadership structure, either formally or informally, will cripple getting things done. Having an objective party to ensure executives are in alignment, engaged and can make decisions quickly—with all the facts so they understand the implications of their decisions—will mitigate the risks.

What are some new areas of concern in M&A transactions, and how do you address them?

Traditional M&A capabilities aren’t enough to support digital deals, and leaders must be hired to build and manage this new area of opportunity. Companies need a business platform that can scale the business, quickly integrate an acquired company, and provide meaningful, forward-looking information on the business. An advisory firm can be a company’s “sherpa” and create a roadmap that’s practical and grounded, having sound methods, clean data architecture and fewer applications with tight integrations.

What steps can a business owner take to prepare for an eventual sale?

You can try and put lipstick on a pig, but in the end, it will show up in the valuation. Providing a sound plan for improving the areas of people, process, policies, technology and organization is the best means to increase valuation.

What should a business owner look for in an M&A advisor?

A business owner should consider the following: Are the advisors independent and objective? Will they push their agenda or yours? Can they articulate tough messages in a thoughtful, helpful way? Do they have the right amount of finesse and directness in their delivery, effectively guiding you through challenges and complexity toward simple, practical solutions? Can you trust them to be an extension of the management team? There should be an understanding of fit, chemistry and culture to ensure alignment between the companies and advisors. The business owner must take the lead, appoint an internal lead or proxy one of the advisors to act on behalf of the leadership team. A lead advisor who’s independent and objective will make things run more smoothly.

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