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April 24, 2023 5 minute read

How To Translate the Deal Thesis Into an M&A Integration Plan

Imagine playing a video game that starts with your character inheriting a business from a distant relative. In video game terms, this isn’t unusual. Stardew Valley, for example, starts with a character inheriting a farm from her grandfather. In these types of games, your characters tend to be dropped on the location with little-to-no preparation, and they get to figure it out as they go. 

Now imagine that same situation in real life. Would you feel confident walking into a business that you knew nothing about? In that situation, would you thrive, or would you — more likely — struggle to keep up with the demands of your new company? 

Merger and acquisition (M&A) integration plans are dedicated to ensuring that when you acquire a new asset or company, you can hit the ground running. They lay out information, determining when certain assets will move over to your control and how different parts of the acquisition work — both together and separately.

M&A integration plans can be used for pre-done deals, but more often, integration companies use them in conjunction with a deal thesis to create a comprehensive proposal for businesses looking to acquire something new. 

How does that work, though? How can you tie the deal thesis into an M&A integration plan in a meaningful and relevant way?

Understanding the Deal Thesis

Before determining how to translate the deal thesis into an M&A integration plan, it’s first important to get on the same page about what the deal thesis is. Essentially, a deal thesis — also known as an investment thesis — is a statement that explains to a potential buyer what the value of their investment would be in terms of their specific goals. 

The M&A deal thesis is a critical document that provides a clear understanding of the strategic rationale for an M&A transaction and guides the entire M&A process, from due diligence to integration planning.

The deal thesis typically includes the following components:

  1. Strategic rationale: This section outlines the reasons for pursuing the M&A transaction. It may include expanding into new markets, diversifying product offerings, or gaining access to new technologies.
  2. Target company analysis: This section provides a detailed analysis of the target company’s industry, market position, financial performance, and potential synergies with the acquiring company.
  3. Valuation analysis: This section includes an analysis of the target company’s financial performance and a valuation based on various metrics, such as price-to-earnings ratio or discounted cash flow analysis.
  4. Integration plan: This section outlines the method for integrating the target company into the acquiring company’s operations. It may include organizational structure, cultural alignment, and operational changes.

Single deal thesis

A single deal thesis is an incredibly focused statement written when a company is looking to acquire a single thing. In this case, the deal thesis outlines the risks and benefits of that single acquisition and measures the acquisition against the company’s specific goals. 

Comprehensive deal thesis

A comprehensive deal thesis is more complicated and more likely to be present in a fully-fledged M&A integration plan. With a comprehensive deal thesis, you’re not looking at a specific investment. Instead, you’re analyzing a portfolio of investment opportunities and determining how that entire portfolio would work toward meeting investment goals. 

Assessing the Integration Landscape

The first step is to assess your integration landscape. For integration companies, an M&A integration landscape essentially gives you the space to answer: “How likely is this company to merge with or acquire another company?” 

Mergers and acquisitions are one of the major ways that companies can scale their business. Still, before worrying about a deal thesis, you first have to determine whether M&A is right for a business based on its current profits, industry news, and overall cultural fit. 

Identifying Integration Objectives

The next step is to identify the goals/objectives underlying the merger or acquisition. Remember that the deal thesis weighs the benefits of a deal against certain objectives laid out by the acquiring company. For the deal to succeed, the acquiring company needs clear and specific objectives. 

When identifying integration objectives, focus on creating SMART goals: i.e., goals that are Specific, Measurable, Achievable, Relevant, and Time-Bound. When companies create SMART goals, they can more easily measure their achievements and make adjustments when necessary. 

Developing the Integration Strategy

Once you know what your integration objectives are, you can begin building an integration plan that moves companies in the direction of meeting those specific objectives. 

Look at each objective you’ve created and ask yourself, “How do I get from here to there with this acquisition?” Each step in your answer should be included in the integration strategy you develop. 

Creating the Integration Plan

The deal thesis really becomes relevant when you create your integration plan. At this point, you’ve assessed your goals and developed your strategy. Now, you can create a deal thesis that speaks to those specific goals and that specific strategy, outlining when companies can expect to reach their goals based on predictions about how the acquisition will pan out. 

Think of your deal thesis like a thesis statement in an essay. The goal is to introduce your integration plan, outline the other information that’s going to be in the plan, and summarize how the specific plan will lead a company to achieve its specific goals. The rest of your integration plan can build upon the work done in the deal thesis, showing how you came to the results you came to and where specific facts and figures came from. 

Executing the Integration Plan

Integration plans are like blueprints. Until you start using your blueprints, you’ll never have a house. Similarly, until you start using your integration plans, you’ll never have a successful merger and acquisition. 

Once you have a plan in place, the next logical step is to implement that plan. Often, this starts with aligning dates in your calendar. For example, if you wrote that a certain step in your integration plan would take place “over the course of two weeks,” it’s time to mark those weeks in your calendar. 

Monitoring Progress and Adjusting Course

In a perfect world, your integration plan would roll out, and everything would fall into place without a hitch. However, this isn’t a perfect world, and integration plans are made based on predictions. Sometimes, customers don’t behave exactly as you think they will, or current events get in the way of progress. So, while it’s important to have a firm outline in place, it’s just as important to stay flexible and know how to adjust course if things don’t go according to plan. 

This is another time when your SMART goals come into play. Your goals should be specific and measurable, and your deal thesis should explain — in a specific and measurable way — how the integration plan will meet those goals. If you reach deadlines that are in your plan and your goals haven’t been met, it’s critical that you are able to make adjustments in real-time to account for any deficits and ensure the rest of the plan isn’t waylaid because of a single misstep. 

Communicating Lessons Learned

Work doesn’t end when the M&A is over. Once the M&A has been completed, the next step is to assess what aspects of your plan worked and which aspects either needed to be adjusted midway through or simply didn’t work as well as they should have. 

These “failures” or “mistakes” serve as valuable learning opportunities for your company, though. As you discuss what worked and what didn’t work, you can learn lessons and apply those lessons to future M&A integration plans. By doing this, your integration company becomes more accurate over time, allowing you to provide the expert-level advice and planning expected from companies that have been around for ages. 

Final thoughts

Your deal thesis and your M&A integration plans aren’t two separate things. Instead, your M&A integration plan should help guide your deal thesis, and your deal thesis should be included in the final copy of your M&A integration plan. By working on these two aspects of your deal simultaneously, you will communicate more effectively and create integration plans designed to succeed. 

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