Corporate Finance, Deal Advisory, Transaction services
What can successful football teams teach us about M&A?
As an avid football fan, and with the club I support (Tottenham – for my sins!) actually having made a couple of, what appear to be, decent signings within the last week, I thought about how the successful football teams in recent years have been driven by effective player acquisitions, and how good acquisitions are also often the driving force behind many successful businesses.
A successful acquisition, regardless of whether this is a player for a football club, or a business being bought by another business, is one that results in long-term value creation for all stakeholders.
A few years ago, Tottenham were consistently finishing ahead of Liverpool in the Premier League table – and in some people’s eyes, ready to be genuine title contenders. Liverpool, however, identified that they were missing players in key positions and spent significant capital to acquire a new goalkeeper, new centre back and new midfielders.
They spotted the areas in which a careful acquisition strategy could bring vast improvements to their operations – and this has resulted in significant success over the last two years, arguably increasing the long-term value. At the time, many pundits and fans thought that they had overpaid for their acquisitions, but given the incremental long-term value that these acquisitions generated, in hindsight, they have probably ended up being good value.
In a business context, many acquisitions take place because a buyer is looking to acquire a new skillset, technology or capability that they don’t already have. Where the buyer already has the infrastructure (things like the customer base, distribution or geographical presence) that they can “plug” the acquired entity into, the long term value can significantly outweigh the cost of the acquisition – as seems to have been the case with Liverpool.
Many businesses decide not to grow through acquisition because they believe integration and culture issues to be too painful. In reality, if acquisitions are carefully thought through and planned for with detailed analysis and integration roadmaps, they are not issues at all. This is very much the same with a football club acquiring a player – if planned for in detail, with a comprehensive pre-season programme, sports science data monitoring, and then pre-match preparation, transition of new acquisitions (if they are the right acquisitions) should be seamless.
Tottenham decided that they had a settled team and squad, and did not want to disrupt this, and so went through two transfer windows without signing any new players. Ultimately, this led to a decline in performance over the following 18 months, and, despite reaching a Champions League final, where they ironically lost to Liverpool, the demise was clear for all fans and pundits to see.
The key, therefore, is finding the right acquisitions that create synergies and long-term value for the business. There are plenty of examples of incredibly successful M&A transactions where this has happened and one of the key reasons why, despite the difficult economic environment, M&A continues to be active and a critical part of the future value enhancement for many businesses.
Let’s hope the new signings for Spurs have the same impact as those for Liverpool!
If you’d like to speak to one of our experienced team about how acquisition could help you achieve long term value enhancement, or if you are considering the sale of your business in the next few years, please get in touch!