How to structure an M&A team? 8 Convincing Methods

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Why should you have an in-house M&A team?

M&A transactions are highly complex and require a top level of expertise, skill and coordination for a successful outcome. Thus, a strong M&A task force team is needed. We will discuss the importance of building an M&A Team from both the buy-side and sell-side perspectives. We will discover the benefits of having a team, leveraging internal knowledge and expertise and overall streamlining the entire M&A process. 

Motivations for building an in-house M&A team 

Building and using an in-house M&A team can be crucial for completing a successful transaction, both on the buy-side and the sell-side. It ensures that the acquirer or seller’s interests are always considered, enhances their bargaining power and can eventually lead to more advantageous and favourable terms and conditions. A common myth around M&A transactions is that external advisors are better to use than in-house teams. However, it is not always the case. External advisors typically can’t thoroughly understand the seller’s business and culture as an in-house team can. 

An In-house M&A team can: 

  • Leverage their internal knowledge of the company being sold to evaluate potential deals more thoroughly.
  • Identify and assess potential risks and opportunities more effectively.
  • Provide input and advice to the ultimate decision maker, all while ensuring the seller’s interests are always considered.
  • Reduce costs for the seller. External advisors are usually highly expensive. 

This approach can result in a higher deal valuation and stronger execution, increasing the likelihood of a successful transaction.  

How to build a good M&A team structure?

Initiating M&A team formation early in the M&A process is good to maximise the likelihood of a successful transaction.  

  • Understanding of the company’s strategic goals and ensuring that potential targets are evaluated for their alignment with these objectives.
  • Ensures efficient allocation of resources, such as personnel, budget, and time.

It allows for identifying and addressing any gaps in expertise or capacity well in advance.

  • Build strong working relationships and establish effective communication channels.

This collaboration is crucial for addressing challenges and making informed decisions throughout the M&A process. To build an effective M&A team, you need to take several key steps:

  • Identify key stakeholders from various departments who will form the core of your M&A team.

These individuals should possess the necessary expertise and experience and fully understand the company’s strategic goals.  

  • Allocate Resources Appropriately

It involves determining how much time each individual can dedicate to the M&A process, considering their existing roles and responsibilities. You need to check their capacity and support to carry out their duties effectively. 

  • Establish a well-defined hierarchy, ensuring a clear path for decision-making and escalation.

Everyone on the team should know who they report to and who they can turn to for advice or to resolve issues through effective communication channels. 

  • Lastly, you need to tackle any potential skill or resource shortages proactively.

It might involve additional training for the in-house team or bringing in external experts. Usually, an M&A team will include external advisors and cover everything from the initial stages through to post-deal integration. 


Key M&A team roles and responsibilities

Now, let’s discuss the key roles and responsibilities within the M&A task force team to ensure a smooth and successful M&A process. Here, we will look at six in-house teams:

  • Senior Management M&A Team
    • This group plays a vital role. They provide strategic guidance and approval, ensuring that the deal aligns with the company’s long-term goals and being involved in crucial decision-making processes.  
  • The Corporate Development Team
    • This team usually leads the whole deal process. Sometimes, they are involved in the entire M&A process, from M&A strategy to post-deal integration. Their actions should be closely coordinated with senior management to align with the company’s strategic goals. They are like the backbone of the whole M&A team. They should be able to manage the project in harmony with senior management and other in-house teams. 
  • Finance and Accounting Team
    • They are responsible for assessing the financial aspects and valuations. They will evaluate the target company’s financial health, perform valuation analyses (in some cases with an external advisor), and manage acquisition financing.  
  • Legal and Compliance Team
    • This team focuses on ensuring legal and regulatory adherence. They will review and negotiate transaction agreements, identify potential risks, and ensure compliance with applicable laws and regulations.  
  • Product or Technology Team
    • They must understand and evaluate the target company’s products, technologies, and competitive landscape. They should analyse the target’s product portfolio and identify potential synergies. They often provide critical feedback on the target company’s technology in commercial due diligence. 
  • Human Resources Team
    • They become even more important, especially in the PMI process. They will establish strategies to prevent the outflow of key personnel, integrate both companies’ workforce, and ensure a smooth transition for all staff members. 

When short in the internal workforce?

On the M&A buy-side, you must identify gaps in expertise and resources early in the M&A process to address potential challenges.

If you feel a shortage in the internal workforce, you can consider the following options. 

  • Hiring professionals for your own M&A team

You can recruit experienced professionals to fill specific skill gaps within the M&A team. 

    • Strength – External hiring brings in fresh perspectives and immediate expertise, helping to fast-track the M&A process. 
    • Weakness – However, the time, effort, and cost involved in hiring and onboarding can be significant. There’s also a risk of a new hire not fitting into the company culture. 
  • Training an internal M&A team

You can provide the in-house team with required training courses to supplement knowledge and skills for the M&A process. 

    • Strength – Training enhances the capabilities of your existing team and ensures that knowledge remains within the company. It also demonstrates a commitment to employee development, which can boost morale. 
    • Weakness – However, it takes time and may not be suitable if you must quickly address skill gaps. Also, the effectiveness of the training depends on the quality of the course and the employee’s ability to apply new skills. 
  • External advisors as your temporary M&A team

You can engage with external consultants, such as investment banks, law firms, or accounting firms, to supplement the in-house team and provide specialised guidance and support. 

    • Strength – They provide immediate access to high-level expertise and deep industry insights. They can guide your team through complex aspects of the M&A process. 
    • Weakness – It can be costly. Maintaining control over the M&A process can be more challenging. And there is also a risk of becoming overly dependent on external advisors. Additionally, confidential information will be shared with outsiders. 

Hiring external advisors as your M&A team

When hiring external advisors, you will consider what kind of advisor you need. Generally, the most common types of advisors involved in M&A transactions include the following. 

  • Investment Banks
    • They play a crucial role in M&A transactions.
    • They help identify potential targets or buyers, provide valuation services, assist in negotiations, and help structure the deal.
    • They also facilitate financing arrangements if needed. 
  • Law Firms
    • Legal advisors are essential to navigate the complex legal landscape of M&A.
    • They assist in drafting and reviewing contracts, perform legal due diligence, advise on legal risks, and ensure regulatory compliance. 
  • Accounting Firms
    • They assist in financial due diligence, financial modelling, and structuring the deal from a tax perspective.
    • They also help in preparing pro forma financial statements. 
  • Industry Specialists
    • Depending on the industry and the nature of the target’s business, you might need to engage advisors with specific expertise.
    • IT consultants, environmental consultants, or HR consultants. 

Fee Structures

Let’s consider a scenario of a mid-sized deal, say a $100 million acquisition. 

  • Investment Banks
    • They typically charge a ‘success fee’ based on the deal size, commonly known as a Lehman formula.
    • They might charge around 1~2% for a deal of this size.
    • They might also charge an upfront ‘retainer fee’, say $50,000, which is usually credited against the success fee. 
  • Law firms
    • Often charge by the hour.
    • For a deal of this size, the fees could range from $200,000 to $500,000, depending on the deal’s complexity. 
  • Accounting firms

These are rough estimates, and actual fees can vary significantly based on many factors. You should also be wary of potential conflicts of interest, particularly with investment banks, as their fee is based on the deal size. 


Harmonising External Advisors

In essence, harmonising the roles of the internal M&A team and external advisors involves a delicate balance of communication, strategic alignment, and control. By achieving this balance, buyers can maximise the value and efficiency of the M&A process. 

  • Clear roles and communication

You need to explicitly define each party’s tasks, deliverables, and decision-making authority. You must also establish reliable and efficient communication channels. Regular meetings, progress updates, and collaborative platforms can all facilitate this.

For Example, when Amazon acquired Whole Foods in 2017, Amazon established clear roles for both their internal teams and external advisors. Amazon’s internal team focused on the strategic fit and pricing, while their external legal advisors took charge of regulatory approvals and contractual terms. 

  • Strategic alignment

External advisors bring immense value with their specialised knowledge and objectivity. However, their advice must align with your company’s strategic goals. To ensure this occurs, you should engage with them early in the process, sharing the company’s strategic vision, objectives of the M&A, and key performance indicators. This alignment allows them to provide pertinent, actionable advice within the broader strategic context.

For Example

Amazon ensured its external advisors understood their strategic goals: expanding their brick-and-mortar retail presence and integrating their technology and delivery systems with Whole Foods. The advisors provided recommendations aligned with this strategy, such as how to combine the companies’ logistics networks efficiently. 

  • Balance of control

The internal M&A team must retain control over the process. It means being actively involved in all stages of the M&A, making informed decisions based on the insights and advice provided by advisors. This balance ensures that external expertise is utilised effectively without compromising the company’s autonomy in the deal process.

For Example

Amazon maintained control over the M&A process despite utilising the expertise of external advisors. The internal team made the final decisions, such as the purchase price and the post-acquisition integration strategy, based on the insights and advice provided by the advisors. This ensured the acquisition was executed in line with Amazon’s strategic objectives and corporate culture. 


Sources and Further Reading

If you have found this information on the M&A Team insightful, head over to the M&A Institute, log in and start our online courses now. Or go to our Youtube Channel for further watching! Other M&A Transactions where the sell-side process can be found:

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