Is Programmatic M&A Right for My Business?

Programmatic mergers and acquisitions are a strategic approach to M&A deals that companies use to acquire several smaller companies to achieve certain goals, such as growth and value creation. This strategy differs from traditional M&A transactions, which usually involve singular transactions and higher valuations.

Programmatic M&A is not new—maybe you’ve heard of it referred to as a “roll-up” deal. This strategy has been around for quite some time, helping businesses to consolidate smaller entities under one umbrella. The two key differences from traditional M&A are the nature of programmatic M&A, as there must be an ongoing effort to get multiple acquisitions completed and the ability to achieve higher returns. Large, one-off deals can fall through, while programmatic M&A deals are often less risky and likely to deliver long-term returns.

WHAT ARE THE ADVANTAGES OF PROGRAMMATIC M&A?

Scalability: By executing several smaller acquisitions, a business can scale incrementally and integrate new capabilities more seamlessly.

Strategic Alignment: This type of dealmaking can bolster the ability of each acquisition to align with the company's long-term goals, improving the overall performance of the business and shoring up the vision of its leadership.

Cost Efficiencies: With smaller deals, you can achieve synergies and cost efficiencies more smoothly.

The Power of Partnership: Programmatic M&A means you gain the power of a company’s existing relationships and partnerships, which is crucial for your business’s long-term inorganic growth.

Faster Innovation: By acquiring companies that already have innovative technologies, your business can get a leg up on the competition much faster and get an advantage when it comes to changing market dynamics.

Faster Growth: By snapping up several smaller companies, a business can expand its product or service offerings, its customer base, and its market reach much more quickly.

A Talent Advantage: This type of M&A strategy can get your business quick access to new talent that offers critical skills and experience that you don’t already have.

Lower Risk: Programmatic M&A can mean lower risk because you are distributing it across multiple deals, so failure is less likely to have more severe ramifications.

Better Agility: With smaller deals, your company can be more reactive and adaptive in your M&A strategy when it comes to market changes. Essentially, you must create a clearly defined M&A strategy based on conviction. This means you can remain on strategy even if the economy shifts.

ARE THERE ANY DOWNSIDES?

All dealmaking is complicated and highly nuanced, so you are bound to run into challenges in any type of deal, which is why it is so critical to have a professional M&A expert in your corner to guide you through the process. Some issues that can occur with programmatic M&A include integration challenges, management strains, cultural incompatibility, and regulatory scrutiny, which can also occur with traditional M&A dealmaking.

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WHAT ARE SOME KEY TRENDS IN PROGRAMMATIC M&A?

Integration of Advanced Tech and Digital Transformation

Artificial intelligence (AI) and machine learning have become critical processes in M&A to identify potential targets through data analytics, automate due diligence to improve efficiency and accuracy, and ensure smoother integration through AI tools. Data analytics helps companies assess target companies, monitor market trends, and optimize deal structures. Programmatic M&A is also seeing more focus on acquiring digital capabilities, including tech startups, digital platforms, and cybersecurity.

Cross-Border M&A

With increasing globalization, cross-border M&A has become more accessible, offering businesses access to emerging markets for growth through programmatic M&A. With access to more markets, there are more options for acquisition opportunities.

ESG

Environmental, Social, and Governance (ESG) factors have become vital to M&A deals, so businesses are focusing on target companies’ ESG performance, goals, and risk management.

TIPS FOR EXECUTING SUCCESSFUL PROGRAMMATIC M&A

Define a Clear M&A Strategy

It is crucial to have a well-defined M&A strategy aligned with your overall business goals and outline the targets your team plans to pursue and the necessary outcomes for each deal.

Set Metrics

Programmatic acquirers should set metrics regarding revenue, costs, capital, budgets, incentives, and governance processes. This helps ensure you can achieve your goals and get the results that you ultimately desire.

Create a Dedicated M&A Team

An M&A advisory team can give you the firepower you need regarding financial, legal, and operational matters. This team should have the expertise to manage all the complexities of M&A transactions and the ability to craft a smooth integration process while getting you the most value in a deal.

Stick to Your Plan

Once you’ve developed your blueprint for programmatic M&A, you need to stick to it. A systematic strategy will get the best results as you actively manage your portfolios and regularly reallocate capital.

Take Advantage of Technology

By using advanced tech such as AI, machine learning, and data analytics, you can have a more efficient M&A process. A professional M&A advisor can ensure that you have access to the best of these tools.

Focus on Post-Merger Integration

You should have a solid plan for integrating key areas, such as operations, technology, human resources, and culture. When companies merge and have different cultures, the right measures must be taken to ensure smooth integration. This means getting leadership aligned, maintaining clear communication with all parties, and keeping employees engaged and excited about possibilities for the future.

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