The Power of McKinsey’s Programmatic M&A: Insights for Successful Exits and Value Creation in 2024 by Fadi Malouf

The Power of McKinsey's Programmatic M&A: Insights for Successful Exits and Value Creation in 2024 by Fadi Malouf

As an investor and entrepreneur with a background in scaling businesses and facilitating strategic partnerships, I understand the significance of staying informed about the latest trends in M&A. Small business owners operating in the revenue range of 5 to 30 million dollars, as well as professionals serving fast-growing businesses, are undoubtedly seeking insights to navigate the evolving landscape of mergers and acquisitions.

The recent report “Top M&A trends in 2024: Blueprint for success in the next wave of deals” by Jake Henry and Mieke Van Oostende provides a comprehensive overview of the current M&A market dynamics and offers valuable insights for dealmakers. The report delves into the various factors influencing the M&A market’s resilience, emphasizing the strategic importance of M&A in an era characterized by transformative shifts in technology, consumer behavior, and sustainability.

In the wake of the tumultuous year for dealmaking in 2023, where global M&A activity experienced a 16 percent drop to $3.1 trillion, the report sheds light on the enduring relevance of M&A as a strategic lever for value creation. It highlights the success of programmatic acquirers, those making more than two small to mid-sized deals annually, underlining their ability to deliver a median excess total shareholder return of 2.3 percent. Moreover, the report underscores the impact of programmatic M&A strategies in outperforming organic growth, particularly during challenging times such as the COVID-19 years.

The analysis also touches upon the shift in the sources of M&A activity, with corporate dealmaking gaining dominance in 2023, accounting for 82 percent of deal value globally. Additionally, it provides insights into regional variations in M&A performance, with the Americas emerging as the most active market for M&A, despite experiencing a decline in deal value.

Looking ahead, the report anticipates a potential surge in M&A activity, supported by a growing sense of optimism among dealmakers. It emphasizes the need for companies to re-evaluate M&A themes, update strategies, and consider alternative deal structures to navigate the evolving geopolitical and market risks effectively.

For small business owners and professionals involved in facilitating M&A activities, this report serves as a valuable resource for understanding the prevailing market trends and preparing for potential opportunities and challenges in the M&A landscape. By leveraging the insights presented in this report, businesses can effectively navigate the complexities of M&A and capitalize on strategic growth opportunities in 2024 and beyond.

Optimistic viewpoint 1
Optimistic viewpoint

Optimistic viewpoint:

As an investor and entrepreneur, I am optimistic about the potential for M&A activities in 2024. Despite the challenges witnessed in the previous year, the resilience of the M&A market and the anticipated surge in dealmaking indicate promising opportunities for businesses to pursue strategic acquisitions and partnerships. The success of programmatic acquirers and the increasing emphasis on value creation through M&A strategies serve as encouraging indicators for businesses seeking to capitalize on market shifts and emerging opportunities. 

With the evolving macroeconomic environment and the growing sense of exuberance among dealmakers, I believe that 2024 holds the potential for businesses to leverage M&A as a strategic lever for growth and transformation.

Pessimistic viewpoint:

On the other hand, considering the lingering geopolitical uncertainties and the impact of regulatory challenges on M&A activities, there are concerns regarding the potential hurdles that businesses may face in navigating the M&A landscape in 2024. The volatility and macroeconomic pressures witnessed in the previous year, coupled with the increasing geopolitical risks, raise apprehensions about the feasibility of executing successful M&A transactions. 

The shifting sources of M&A activity and the complexities of regional variations in deal performance also contribute to a sense of caution about the potential impediments that businesses may encounter in pursuing M&A strategies. Amidst these challenges, it becomes imperative for businesses to carefully assess the risks and uncertainties associated with M&A activities and adopt a vigilant approach to dealmaking in the coming year.

How To Prepare:

I’m glad to help! Here’s a guide on how to prepare a small business for an exit within three years, based on a recent report:

1. Financial Assessment:

   – Conduct a thorough financial analysis to understand the current state of the business.

   – Review the recent report and identify key financial metrics and performance indicators to assess the business’s value.

When conducting a financial assessment and reviewing the recent report to identify key financial metrics, you can utilize tools like Microsoft Excel for creating financial models, analyzing data, and generating reports. Excel provides powerful features for performing calculations, creating charts, and organizing financial information in a structured manner.

Operational Efficiency 1 1 1
Operational Efficiency

2. Operational Efficiency:

   – Streamline operations and optimize processes to maximize profitability and appeal to potential buyers.

   – Consider the recommendations or insights from the recent report to improve operational efficiency.

For operational efficiency and process optimization, project management tools such as Trello, Asana, or Jira can be used to streamline operations, assign tasks, and track progress. These tools facilitate collaboration among team members, help prioritize tasks, and provide visibility into the status of various operational activities.

3. Market Positioning:

   – Evaluate the business’s market positioning and competitive landscape.

   – Incorporate insights from the recent report to identify opportunities for growth and differentiation within the market.

In terms of market positioning and competitive analysis, tools like SEMrush, Ahrefs, or Moz can be employed for conducting keyword research, analyzing competitors’ online presence, and gaining insights into market trends. These tools provide valuable data for understanding the competitive landscape, identifying opportunities for growth, and optimizing the business’s online visibility.

4. Legal and Regulatory Compliance:

   – Ensure that the business is compliant with all relevant laws and regulations.

   – Review the recent report for any legal or regulatory implications that may impact the exit strategy.

When it comes to legal and regulatory compliance, compliance management software such as LogicManager or ZenGRC can assist in ensuring that the business adheres to relevant laws and regulations. These platforms offer features for tracking compliance requirements, managing risks, and maintaining documentation to demonstrate regulatory adherence.

Succession Planning 1 1
Succession Planning

5. Succession Planning:

   – Develop a clear succession plan and identify potential successors within the organization.

   – Utilize the recent report to anticipate any challenges or opportunities related to succession planning.

For succession planning, HR management systems like BambooHR or Workday can be utilized to identify potential successors, manage employee data, and develop succession plans. These tools enable HR professionals and business leaders to assess employee skills, performance, and career aspirations, facilitating the identification of suitable candidates for key roles within the organization.

By leveraging the insights from the recent report, you can strategically prepare your small business for a successful exit within the next three years. Make it happen!

For those seeking further insights into business valuation, I recommend exploring our Business Valuation Calculator. This tool can assist entrepreneurs and investors in assessing the value of their businesses, providing valuable guidance for strategic decision-making in the realm of mergers and acquisitions.

In conclusion, the preparation process outlined in the article offers valuable insights for business owners and entrepreneurs looking to optimize their operations. By following the steps provided, individuals can streamline their workflows, improve efficiency, and ultimately drive growth within their organizations. I invite readers to share their own experiences and additional tips for preparation in the business context. Your feedback and thoughts are valuable in fostering a community of learning and development. Let’s engage in a constructive dialogue to collectively enhance our approach to preparation in the business world.

Thanks to McKinsey & Company , Jake Henry and Mieke Van Oostende

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