Unlocking the M&A code: 5 factors that can make (or break) a deal

Mergers and acquisitions (M&A) have long been a driving force for companies seeking exponential growth, gaining market share and creating shareholder value. History has shown that well-executed M&A strategies can be transformative and yield impressive results.

For instance, Disney’s acquisition of Pixar in 2006 revitalized the animation giant’s fortunes, though market analysts were skeptical of this move when it was announced. In a conversation with CNBC 15 years later, Bob Iger stated it was perhaps the best acquisition decision during his time at Disney. “It put us on the path to achieving what I wanted to achieve, which is scale when it comes to storytelling,” were his exact words.

But the Disney-Pixar marriage isn’t the only one that proved to be a massive growth engine. Facebook’s purchase of Instagram in 2012 allowed the social media behemoth to dominate the photo-sharing space. There are many such examples in the history of businesses around the world.

But all’s not rosy in the world of M&A. It is a complex and substantially risky decision, not for the faint-hearted. It is essential to approach the decision and process with diligence and forethought.

Over the years, with experience navigating the complicated world of M&A, including eight acquisitions in just the past few years, I have built five indispensable elements to consider for a successful mergers and acquisitions journey.

Be watchful of revenue synergies 

One of the critical drivers of a successful acquisition is the ability to achieve revenue synergies. However, what’s more important is not to assume this synergy will automatically occur just because it seems feasible.

Making a decision about consolidated revenue potential after the M&A involves carefully analyzing the potential for growth and gaining clear visibility into how to maximize synergy. Consider acquiring companies with high sales velocity and exponential growth potential to maximize success. Analyze the target’s product offerings, customer base and sales channels to identify cross-selling, upselling and market expansion opportunities.

For instance, in 2015, PayPal acquired Braintree, a payments company that owned the mobile payment service, Venmo. It was a strategic and wise move at a time when digital payments were just taking off across the globe. Now in 2023, PayPal is relying on Venmo to drive the adoption and usage of the company’s digital payments services. The two operations are expected to converge by next year. This acquisition has enabled PayPal to tap into the growing peer-to-peer payments market and strengthen its revenue streams.

Don’t let refactoring throw cold water on your go-to-market strategy

Tech CEOs often make the mistake of assuming that a product will seamlessly integrate into their existing tech stack, especially in a tuck-in acquisition. However, this may not always be the case.

Before making your decision about the acquisition, take the time to evaluate the target company’s go-to-market (GTM) strategy and the ease of finding, buying and deploying their products. Focus on creating a new integrated version in the future to give yourself a longer runway to iron out any issues. This allows customers and employees to see a roadmap for future success.