Corp Dev Best Practices

I am going to be starting a new Corp Dev role here in January, I am moving from a larger Corp Dev team (think F50, very well built out) to a smaller public company with a smaller team. I can touch on the reasons behind the move, but basically I get to have a big say on the how to shape the CD function at my new company moving forward.


I have some ideas on best practices to implement/add, but wanted to crowdsource here to see what other people have done/do that they think are really helpful.


As a background, the company I am joining is <$10B in EV and will plans to do everything from small role ups (~$10M EV) to larger transformative deals in the low $Bs in EV. We also will likely be looking at divesting a smaller segment of the business in the first year after I join ($100Ms EV).


Thanks in advance and hopefully this is a helpful discussion for other folks as well.

 

Appreciate the insight and had similar thoughts.

For potential targets/pipeline is there a way you do this? Whether it be in excel or other software/databases? I have done it both ways and don't really have a preference. I also try and keep key target stats/characteristics like: financials (if know, or an educated guess), location, product/business line fit, ownership type, etc.

 
D3soccerguy

Appreciate the insight and had similar thoughts.

For potential targets/pipeline is there a way you do this? Whether it be in excel or other software/databases? I have done it both ways and don't really have a preference. I also try and keep key target stats/characteristics like: financials (if know, or an educated guess), location, product/business line fit, ownership type, etc.

I built out the CD function at a small roll up < $50m rev and was part of the M&A team at a mid market roll up <$500m rev. I used the free version of hubspot for my pipeline management in addition to an excel tracker for the opportunities that were further along. I built up one of the databases up to 5,000 potential targets across the U.S. 

 

Yeah I tried to keep it broad since I'm hoping to just get any and all suggestions, and hoping to learn some new things that maybe aren't 'bread and butter' per se. So not super helpful since it is not super pointed, but just looking for stuff that people have found useless for CD in any areas.

One thing I have been thinking of, and am going to work through, is how to best track perfromance of past deals for key KPI's. This will be imperfect, but wanted to have some way to track how a deal has done and what areas of improvement could be or stuff that we should keep doing. My old CD job had a tracking model that was far too complex, and did the job but I don't think in the best way. 

 

I think it's key to just be simple - I've seen a few trackers that have 5+ KPIs, and the reality is that no one really cares about all 5, just the 1-2 that are actually important. We do a quarterly reviews that include the business unit that signed up for the deal, key employees that came over as part of the acquisition, integration lead, deal team lead, and our leadership team. The key employees usually have a laundry list of things they think could be improved, especially on the integration front which is pretty helpful for future deals as new things come up. 

 
Most Helpful

More theoretical than practical, but I think aligning on a mission statement for the corp dev function really creates efficiencies in the work flow. What is the corporate goal and then how does corp dev tuck into that? Are you going for scale, are you looking a strategic fits, what are the KPIs that ate bare minimum need to be hit in order to even let it through the screen?

This all probably sounds routine for a larger corp dev team, but on the smaller company size (this is where I am right now), you would be shocked at how many times we spend a crap ton of time doing some initial diligence on opportunities that don't even make sense and we just don't have the manpower to waste that time and sustain any sort of efficiency. As a group we finally got out of kicking the rocks on every opportunity and then stacked hands on the 2-3 things that have to check the box before we waste any time on something. And it's important that those 2-3 things are rigid....otherwise you can find yourself negotiating with yourself on how to make those 2-3 things check the box. 

As a result of this, we end up doing a lot less deal work, but our hit rate on those deals is much much higher. 

 

I want to echo this sentiment. I have found at smaller companies or when building out a CD function the firms leadership isn't exactly sure what they are solving for so they want the CD team to "do work" on anything close to a fit.

I have found that back solving for return metrics helps contextualize to leadership what makes sense vs. what will never pencil out in a model. 

 

Below are two main suggestions I have.

1. Have a Strategy

In my past couple of roles the corp dev team was more reactive than proactive. Most of the opportunities we researched were from inbound sources (e.g., bankers, suggestions from other teams, etc.) rather than us going outbound with an actual strategy and list of targets. Although both of these teams were a part of billion+ companies, IMO we were limited in realizing our potential as a team by not having a defined strategy. We were constantly fielding all inbound opportunities, wasting time fulfilling random requests that didn't have a future, etc. IMO it all starts with the company's growth strategy, separating that into inorganic and organic areas, ranking inorganic areas, then formulating a plan of attack for top fields (e.g., target lists, going outbound, etc.) while working cross functionally for input and approval. I'd imagine more "legit" corp dev teams at larger companies have a similar approach, but I though it'd be worth pointing out.

2. Have a Vision

On top of formulating a strategy, I think having a vision for the team and how it fits in the larger organization is also something to consider. In a previous role we sat underneath the CFO. My manager at the time didn't know how to say "no" and set boundaries and eventually got looped into everything finance related that needed more manpower (e.g., FP&A, answering random CFO questions, etc.). To be fair, I think a lot of corp dev teams play into other departments a bit here and there, but on average we were doing 50% random finance stuff and 50% corp dev limiting how much time and effort we could devote to #1 above. 

I think all the processes of getting in the weeds comes with time and at the end of the day a lot of it doesn't matter that much as as it gets done, but I really do believe the first two points above can really set up a team for success.

Some other practical stuff in no particular order that has helped me:

  • Create standard templates (e.g., valuation, scorecards, target lists, folder structures, due diligence lists, NDA's, integration lists, etc.) during your downtime and before things get hectic
  • Get connected internally to the right person in each department (e.g., legal, HR, finance, product) that can help you perform due diligence on opportunities as well as lead integration eventually
  • Send agendas before all discussions, even internal ones - can't tell you how much time has been wasted with people just staring at the camera fumbling through what to talk about

Also, for context I work in tech where in general things are a little less technical from a finance / strategy perspective when analyzing opportunities and more about gut feeling from what I've seen so far.

 

A lot of good stuff already above so I’ll throw something new out; go out and define each divisions / deal owner with a readiness score for acquisitions. Take into account things like deal size, oversight capacity, internal IT systems, cross functional team capabilities, etc. it’s less about having a good score and more about being eyes wide open with your opportunities.

It’s important to know what the organization can handle, how often they can tuck in, etc. — if it’s a must have deal regardless of your readiness you’ll know what gaps need to be addressed early and can be flagged up front.

Good luck, CD can be very rewarding. The dispositions can sometimes be most educational… take notes on that one divestiture you have, it’ll change your perspective in many ways.

 

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