The objective of this post is to describe, at a high level, the major roles and responsibilities in a typical tech M&A project. Each company tends to have their own playbook for M&A deals. Based on my past experience I have summarized the typical roles and responsibilities in an M&A project. You should talk with people in your company to learn if there is a formal process in place for deals and what the roles and responsibilities are in that process.
The top executive in your company will lead your project. They are accountable for recommending the deal to the board of directors, investors, shareholders, and lenders if required. The CEO/President will actively participate in almost every step of the process. Most CEOs will have had past experience in M&A and will impart their particular style on the deal. Personal styles vary significantly. One CEO that I worked for, who had led over 60 M&A deals, was very aggressive. He used the process to dominate the target company and convert the target company’s executive to his vision of a management system. He tried to keep the target company so busy with due diligence tasks and integration planning tasks that they barely had time to breathe or really think about what they were doing. Other CEOs I have worked for have taken a more collegial approach to the process aimed at winning the hearts and minds of the target company. A third CEO delegated most of the work to his executive team. One approach is not necessarily better than another. What is important is to understand how your leadership wants to approach the process.
The CFO/VP Finance will be involved in nearly every aspect of the process. First, they will be the definitive source of financial information and modeling. They will construct models of your company’s finances, the target company’s finances, and what the combined company’s financial statements will look like. CFOs will play a major role in the due diligence process. In addition to conducting financial due diligence, they will also typically coordinate legal due diligence (in most company’s internal general counsel often reports up through the CFO). The CFO will be actively involved in briefing boards of directors, investors, investment bankers, and lenders. CFOs bring a unique perspective to the table. They can bring practical insight into the operation of almost every function in the business that can help with the assessment, diligence, integration planning, and rollout of the acquisition.
Many companies have their own internal general legal counsel. They also employ outside law firms to support various parts of the transaction. This includes items such as legal due diligence, formation of legal entities to effectuate the acquisition, negotiation and execution of agreements such as term sheets, definitive agreements, and regulatory filings.
VP Business/Corporate Development
The VP of Business/Corporate Development will serve to coordinate the overall process. Typically this involves doing baseline research and analysis of acquisition candidates and arranging initial meetings between their company’s management and the target company’s team. He/She will be responsible for coordinating the due diligence process including the development of diligence information requests, managing the data room where confidential information is exchanged, and managing the logistics of the diligence process. The VP Business/Corporate Development will typically be the point person for managing the relationships with Investment Bankers involved in the process. They will also coordinate the merger integration planning and rollout process.
VP Human Resources
The senior executive responsible for human resources will be involved in due diligence, integration planning, and acquisition roll out. They will be responsible for assessing talent throughout the organization. In diligence they will assess compensation plans, benefit plans, human resource information systems, training programs and systems, compliance with various regulations, and employee-related litigation. During Integration Planning they will determine how to blend compensation and benefit plans, employee and onboarding. In many acquisitions some employee positions are eliminated or made redundant. The senior HR executive will determine and manage severance plans. They will also orchestrate the process of notifying employees of the termination of their employment. They will handle mandatory regulatory notifications, like warnings under the U.S. Worker Adjustment and Retraining Act. If the company has International operations The VP HR will also coordinate dealings with employee organizations such as European Works Council.
CTO/VP Research & Development
The senior technology executive in the company will generally participate in almost every part of the process. They may not be involved in the very early stages of the process where the CEO/CFO first meet with the target company’s management, but once there is a basic agreement to seriously explore a deal, usually after the exchange of a term sheet, they will be actively involved. The CTO/VP R&D will be the primary person to assess the quality and capabilities of the target company’s solutions, technology, and technical operations. They and their team will develop the technical diligence request and conduct technical due diligence. They will assess the risks the target company’s technology has and what steps have been taken to mitigate those risks (e.g. disaster recovery, continuity of technical operations, etc. In Integration planning they will determine how to blend development teams and organizations, as well as consolidate/leverage development environments, data centers, and cloud operations. Post closing they will lead the expeditious rebranding of products and services to meet the needs of the new organization.
In organizations that offer SaaS or hosted solutions, the senior executive responsible for those operations will be involved in the M&A process in a manner similar to the CTO/VP Research & Development. As a part of the diligence process they will assess the structure, capabilities, and certifications of data centers or outsourced operations. They will rationalize, to the extent possible, the costs and use of infrastructure software like operating systems, databases, packaged software, systems management tools, etc. In Integration planning they will develop a detailed plan to integrate the two company’s technical operations. Often, they will find best practices and capabilities in the target company’s operations that can be leveraged in their own.
Like the CTO, the senior marketing leader will typically get involved in the process once a decision has been made to work together. They will prepare the marketing due diligence list and participate in the sales, marketing, and technical due diligence sessions. They will be accountable for assessing the product management and product marketing teams. They will also assess demand generation programs and major events like customer conferences, trade shows, and advisory board meetings. The senior marketing leader will manage the relationships with industry analysts like Gartner, Forrester, Ovum, etc. and manage the briefings of analysts at the appropriate time. They will also be responsible for updating corporate branding, signage, websites, etc. They will oversee the work of product managers / product marketers in the Integration Planning process and the acquisition rollout.
Product Managers are usually involved in three parts of the process. First, they participate in background research and acquisition candidate analysis. Product Managers are expected to be experts in your company’s markets. They understand the size, growth trends, and key drivers. They also should understand the competitive landscape – who re the competitors, the positioning of the products/services, the opinions of industry analysts, the geographies where they sell and support customers, the pros and cons of their technology. They should also understand the basic revenue, profit, and valuation trends.
Product Managers also play an important role in merger integration planning. They assist in the development of the new company’s positioning, the roadmaps of acquired products/services, overall goto market plans. They also participate in the development of marketing and sales training materials that are deployed during the rollout.
Product Marketers play a similar role to product managers. They may be involved in background research and acquisition candidate analysis. The play a key role in integration planning and roll out. They develop the combined companies messaging platforms, value equations, and proof points. They update corporate branding, collateral, signage, websites, and sales tools. They brief industry analysts and press on the acquisition. They play a major role in sales training during the rollout phase of the acquisition.
The VP of Sales will be involved in the latter stages of due diligence, integration planning, and acquisition rollout. VP Sales are often not involved in the early stage of the process due to concerns that their own company must continue to hit their revenue targets and the target company may be sensitive that they will expose too much info about major sales deals and the contents of their pipeline. Once the definitive agreements have been negotiated, the VP of Sales starts to play an active role. They need to assess the structure and talent in the sales team, both direct sales and indirect sales via partners and distributors. They must assess sales compensation plans and determine how to integrate such plans with their current sales compensation plan. They also assess the sales process and support tools like SalesForce. Often, the head of sales will tour International sales locations with the CO and CFO during operational due diligence. In integration planning they determine how to structure the combined sales force, what sales process to use, who the sales leaders will be, as well as sales compensation and quotas.
VP Professional Services
The VP Professional Services will be involved in due diligence, integration planning, and rollout activities. They will assess the consulting leadership and staff as well as their consulting offerings. They will also assess the depth, quality, and availability of external consulting partners. In Integration Planning they will design the integration of the two professional services organizations and how professional services are sold.