Strategy - Mergers & Acquisitions Strategy
Project Example | Nonprofit Strategy
Mergers & acquisitions strategy
Context
Nonprofit mergers and acquisitions (M&A) were increasingly common in my client's space, and my client routinely encountered opportunities to explore the acquisition of other organizations. The client sensed that M&A had the potential to be a powerful strategic tool, but was also aware of the potential risks involved. To ensure it could make smart decisions about M&A, my client requested a strategy to inform how M&A could help it pursue its strategy and what deal profile(s) to seek.
Key Question
How can mergers and acquisitions help us achieve our strategic goals? What profile of deal is best for us to pursue?
Solution
I translated M&A value creation theory into practical nonprofit terms to help my client avoid the typical "fuzzy, feel-good" rationale for mergers in the nonprofit space. I explained four typical M&A value creation levers for nonprofits:
- Reduce Average Cost - Lowers the all-in costs of delivering impact as a result of economies of scale or vertical integration.
- Bend the Growth Curve - Growth of the acquired operation is accelerated when integrated into the acquirer’s business model.
- Enhance or Transform the Business Model - Enhances the value the acquirer is able to create by adding a strategically relevant capability.
- Generate Unrestricted Resources - Generates positive financial returns for the acquirer as a result of unique value the acquirer can add to the acquired organization.
I also identified what kind of M&A deal would be worthwhile for my client to pursue and the deal profiles that would best help my client achieve its strategic goals.
Activities included:
- Analyzed merger & acquisition activity in my client's sector.
- Developed "menu" of value creation levers to pursue through mergers & acquisitions.
- Recommended the most favorable value creation opportunities for my client.
- Described the ideal deal profile for top value creation opportunities.
- Developed templates to help client make strong decisions when evaluating deal opportunities.
Results
My client gained buy-in for the mergers & acquisitions strategy and put its insights to use in evaluating potential M&A deals.
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