Competitive Analysis for M&A

By Jacques Murphy August 15, 2007

from PRODUCT MANAGEMENT CHALLENGES
A Weekly Newsletter of Tips For Companies that Develop Software

My previous articles have provided tips on competitive analysis to make the sales force more competitive, and to make the product more competitive. Today's topic covers another important use of competitive analysis, which is to gather valuable information for Mergers and Acquisitions (M&A), to find companies that would make good potential acquisitions for or purchasers of your company.

This same activity can have a different outcome from an actual merger or acquisition. It could be 'M&A lite, ' such as a strategic alliance or partnership that strengthens your product in a new sales channel or adds competitive functionality.

And looking for new functionality, then figuring out how to put it in the product, whether by developing it internally, embedding another company's technology, or partnering, falls right smack into the area of responsibility of a Product Manager.

Read below for tips on gathering competitive intelligence for use in M&A or strategic alliances.

It's Very Personal

More than the product, more even than selling strategies, when you evaluate a company, it's all about people. A competitive study of a company is a very person-oriented project.

As you gather information about individuals at a company, you slowly build a complete picture.

All the Way to the Top

More even than other competitive analysis projects, this one needs to involve the people at the top of your company.

Be sure to interview all the members of the top management team for their impressions of, knowledge of, and experience with a company.

Go all the way to the members of the board, and to executives at important customers. It takes a little nerve, but this is the level of people where you can capture gossip and hearsay that is much more meaningful than just gossip or hearsay. This is the level where much of the schmoozing includes discussion of critical and private business issues that are important to people who are funding and running companies. You'll talk to people who heard the inside story behind a merger or product launch.

A Company is Like a Person...

Try to approach the company you are studying as a person, with likes and dislikes, preferences, strengths and weaknesses, and friends and enemies.

A company has a definite personality, and the key to understanding that company is to develop a profile of its personality.

...with a History

A company, also like a person, has a history. And when you want to understand how a person is likely to react in a specific situation, or what they are likely to do, you look to how they have acted in the past.

It's a little more complicated with a company's personality, though. You need to pay attention to significant changes in the management team that coincide with changes in the company's personality. Unpredictable or unstable behavior may be a function of changing management, rather than a trait of the company itself.

Friends, Family Portraits and Weddings

Look for all partners and alliances that a company has made, as well as the ones that were strong in the past and are now broken.

Pull together a family portrait of all these companies to look for common strategies, strengths, and weaknesses.

And when there was a 'wedding' in the family, meaning past mergers and acquisitions, try to obtain as much as you can about the individual companies pre-merger, and see how things changed once they got together.

And it's worth asking: 'Is it a strong marriage?' A difficult acquisition could create a lot of growing pains and leave an opening for your company to make a purchase.

The Household

The equivalent of the household in this case is the business and how it is run. What's the business model? Is it compatible with yours? Is it radically different?

If reading about the business model is like reading about your own company, you may very well have found a great match of business cultures.

What's He Like

Try to pull together a broad range of information about a company. How big, how old, how fast moving, how excitable, how friendly. Not to mention how many employees, how many offices, and the org structure.

Heroic Strengths

Identify the company's major strengths. As the champion of your own product, you are focused on your own strengths and how to spin your competitors' strengths so that they sound like weaknesses. But it's time to take a more objective stance and look on a competitor's positive side.

Tragic Flaws

What about major personality problems? Some companies are too proud, refusing help or input from others (let alone offers to merge or buy them). Has the company stubbornly pursued something--a new product or sales channel, for instance--without any success it can point to? Is this a blind spot?

Compare the strengths and weakness with your own to see if they are complementary.

Finding Common Bonds

Because of the personal aspect of this analysis, when you want to approach a potential candidate about an acquisition or strategic alliance, look through your entire organization, including customers and partners, to find common bonds with the candidate.

Look for alumni of the competitor who now work at your company, and vice versa. Look for ties through the boards of directors and through partners and strategic alliances.

Like mutual friends, these people provide the best way to approach the company to begin overtures about meeting, getting to know each other, and dating with a view toward marriage.

Copyright (c) 2002-2004 Jacques Murphy. All rights reserved.

Categories: Strategy Leadership
Jacques Murphy

Jacques Murphy

Jacques Murphy is a consultant who helps software companies develop their products faster. He does this using a focused process which quickly develops product requirements. Contact him at www.ProductManagementChallenges.com.

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