Programmatic M&A works as a strategy for planning different deals around a specific theme or case. Despite making a large deal, this strategy works effectively to empower your business to engage in small deals. This blog highlights important aspects related to programmatic M&A strategy.
Why is it important to build a thematic M&A pipeline to benefit from a programmatic M&A strategy?
In various aspects of organizational growth, building a thematic pipeline of M&A is important from a programmatic M&A strategy. However, often companies face issues due to unspecified M&A ideas, proceeding in vague directions. But, an effective strategy influences the potential of an organizational asset over the current talent or revenue of the company. In addition to that, business owners can avoid the hassles of setting up separate legal entities and bureaucratic issues. Besides, while moving into tangential markets, the sales force can get the opportunity to upsell and cross-sell new products to both target and existing customers.
Hence, to get these advantages and avoid progression in the wrong direction, developing a pipeline of acquisitions around a few explicit themes of M&A is beneficial. These themes act as business plans, utilizing both organic and M&A investments to achieve specific goals.
How does programmatic M&A work?
To get potential benefits from a programmatic M&A strategy, it is important to build a thematic M&A pipeline as the themes work as business plans, utilizing organic and M&A investments. Priority themes work effectively when a company requires M&A for delivering its strategy as well as adding value to its targets. The effects of themes are measurable in product development, customer segment and market share goals. If it is executed in the right way, this strategy can play a vital role in having a competitive advantage. Furthermore, it helps companies to specifically set achievable expectations of growth, irrespective of market fluctuations. Organizations that use the Programmatic M&A approach, make a deal that flows linked to the conviction in the corporate strategy.
Let’s take a look at the merits of adopting a theme based small but multiple acquisition approach.
Benefits of programmatic M&A
Streamlining Budget
This strategy helps a business leader to allocate sufficient capital, required for executing proper deals. Despite accumulating a good amount of budget for a single big deal, a leader can consider different themes of M&A and deliver a corporate strategy without a big investment.
Ensuring Sufficient Capability and Capacity
M&A consultants can ensure that your company has sufficient capability and capacity to close a deal successfully. This capability involves having a sufficient budget, entering a new market with the help of the acquisition launchpad to transform and having the vision to introduce new products.
Improving Agility
Organizations, working with programmatic M&A capability, can improve their agility and can adapt easily and quickly to changes in different markets and business conditions. In the current highly volatile condition, agility contributes to boosting performance and reducing the effects of market risks.
Improving Investment Ability
If your company serves small business segments or geographic areas, programmatic M&A can be beneficial for you. With the help of this strategy, you can improve your investment ability and examine various small areas of business before you plan for a big merger.
With such multiple benefits, there are multiple roadblocks that companies witness while heading to programmatic M&A. Below are a few challenges and methods to solve it.
Challenges a company can face with programmatic M&A and their solutions
Though programmatic M&A works as a beneficial strategy for corporate restructuring, some hurdles can take place at the time of building a thematic M&A pipeline for programmatic acquisitions, such as-
● As interest rates continuously fluctuate, companies, bound by M&A, become vulnerable to debt issues.
● An M&A-bound company can face serious problems due to labor shortages, supply chain issues and unpredictable demands of consumers if the company remains unprepared.
● At the time of cross-geographic acquisition, risks of data integrity and security are prevalent in programmatic M&As.
Trends of programmatic M&A in 2022 and hope in 2023
According to research by McKinsey, in the Global 2,000, 59 out of the top 100 organizations built the capability of programmatic M&A. These companies witnessed potential success in surviving and reshaping their portfolios. Besides, a recent global report by McKinsey states that the global market of M&A declined in the first half of 2022. In America, deal makers have been active traders. The share of Africa, the Middle East and Europe is slightly up (28% versus 26%), on the other hand, the share of Asia-Pacific (24% versus 22%). This data shows that due to volatility in stock markets and collapsed financing markets, the global activities of M&A fell slightly short in 2023. In this condition, dealmakers are predicting that the market will recover through a slow path in 2023.
Final Thoughts
In a nutshell, it can be summarized that in the current unpredictable era, programmatic M&A is effective to align the corporate strategy with evolving trends of the market. Companies may face some challenges while building a thematic M&A pipeline for programmatic acquisitions. However, it is an effective roadmap for companies to leverage core strategies and competencies to address opportunities for effective deal value and inorganic growth.
GrowthPal has established itself as an expert in Programmatic M&A. In this regard, it deliver personalized recommendations and guidance according to your goals in business. As a result of this guidance, you will be able to make valuable informed decisions and after that, close deals in the required time.
To know in detail, contact us today.
