M&A success depends heavily on a deep understanding of the target company, one that can’t always be provided by company reports or mentions in the news. According to Harvard Business Review, 70-90% of M&A deals fail, often due to “integration issues” like building a single culture, commonality of thought, and succeeding at collaboration.
Industry nuances, company culture, leadership styles, competitor interactions — these are things you won’t necessarily uncover by researching numbers and figures, yet they significantly impact whether or not two companies can succeed as one entity.
Expert calls can be a critical tool for filling the gap. They provide high-level, firsthand insights that paint a more complete picture of your potential investment and position you to make more fully-informed decisions.
Here are 5 surefire ways expert calls can lead to M&A success for your firm.
- Firms turn to expert networks and expert calls to gain detailed insights on potential investments that can’t be found elsewhere.
- Experts provide critical firsthand information that can reduce the risk of M&A failure due to reasons like lack of cultural fit and misunderstanding the target company.
- Market trends are nuanced, and experts can provide valuable explanations and context that provide a more complete picture for M&A investors.
- Unbiased expert interviews can provide important guidance for firms making M&A deals in complex and/or highly regulated industries.
- Experts can offer neutral insights about competitors that can contribute to a firm’s overall risk assessment.
Expert calls: a quick overview
Expert calls are interviews with seasoned experts from a particular industry or company of interest to the interviewer. Experts have executive-level, firsthand experience as an employee, customer, or competitor of the company being discussed. They are able to provide valuable insights typically not available through traditional research methods.
Equity investors increasingly use expert calls to gain a “boots-on-the-ground” perspective and better understand the nuances that exist within a target company prior to making an investment. As technology has accelerated the speed at which investment decisions are made and increased the volume of information available, this type of focused, trusted insight can be critical.
More and more firms are seeing the value. Recent research shows that the expert network industry size surpassed $1.5 billion in 2020 and continues to show a strong trajectory of revenue growth.
Interestingly, this same study shows that private equity and other buy-side firms account for more than half of the expert network industry’s total client pool as of last year. Given that equity investments require a deep understanding of target companies and the way they run, this makeup is not surprising.
M&A success in particular relies on a complete understanding of the companies involved in a deal. This goes beyond numbers and figures. Leadership styles, operating procedures, company culture — these and other similar intangibles play an impactful role in determining whether an M&A deal will succeed or fail.
5 Ways Expert Calls Lead to Successful M&A
Give real, firsthand company information
There are many reasons companies decide to enter M&A deals, and it’s rare that all parties in any given deal will share exactly the same motivations. This, coupled with the fact that two of the top reasons for M&A failure are lack of cultural fit and misunderstanding the target company, indicate that even the arduous due diligence processes that are the norm in today’s investment world still leave gaps that can have consequences.
The firsthand information firms can gather from expert calls is one powerful way to fill them. Experts are formerly involved parties with the target company, meaning their interests are neutral and their firsthand insights (when the right disclaimer steps are taken) won’t present a conflict of interest.
When it comes to questions of culture, leadership styles, internal motivations and challenges, and other important yet intangible factors that affect M&A success, there is no replacement for insights from someone who actually spent time as part of the organization.
Help with compliance
Compliance plays a critical role in M&A for a few reasons. First, firms will want to uncover any red flags shown by target companies in the form of legal violations (antitrust, data privacy, health and safety, and sanctions are just a few examples of relevant areas that should be part of due diligence).
Second, firms need to know the rules and regulations a target company must comply with as a result of their location, industry, client base or any other reason. In this case, expert calls can be a valuable source of insight and guidance.
Not only can experts provide deeper explanations of compliance rules, regulations, and risks, they can evaluate how they might apply to a specific M&A deal and help firms ensure they are covering all bases when it comes to compliance assessment.
Provide insight on market trends
Is Netflix still the king of streaming media?
Can Victoria’s Secret recover the market share they lost to celebrity-headed upstarts?
Will Petco’s go-to-market strategy work in today’s biotech-driven pet industry?
If you’re looking to answer questions like this for your industry, then insider opinions are your most reliable bet. Any experienced investor will tell you that understanding market trends requires more than checking charts and graphs. There are countless factors that affect market trends for better or worse, some fleeting and others impactful over time. When you are not immersed in that market or industry, it can be difficult to discern what’s meaning and what’s simply a blip on the radar.
Experts can not only provide valuable context and insight around market trends, they can give insights on what’s likely to happen in the future. While this type of forecasting can be anecdotal, it’s a valuable supplement to data analytics.
Explain complex issues or nuances
One of the most common ways experts provide value on calls is by serving as industry experts. Outside of due diligence on a particular company, getting up to speed on its industry is equally important to understanding whether an M&A deal is likely to be successful.
Firms can turn to experts to explain the ins and outs of a given industry, including complexities and nuances that must be understood to successfully operate within it.
This type of insight can be especially valuable for M&A deals that involve highly technical or regulated industries such as pharmaceuticals, energy, healthcare, and financial services — all industries making up a big chunk of the M&A pie in the U.S. over the past several years.
Talk about competitors
What’s really happening with competitors of your target company? Expert calls can be a source of information on company competitors that you can’t find elsewhere. Not only have experts dealt with these competitors firsthand during their time with a company, they’ve often worked with them directly in other roles.
Experts have no motivation to minimize risks or challenges posed by competitors and may even know more about them than those in your target company. They can provide a complete and true assessment of the competitive landscape that contributes to your overall risk assessment.
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