8 Essential Metrics for Streamlined M&A Pipeline Management

Monitoring pipeline metrics serves as a continual check-up for M&A and corporate development initiatives. By doing so, one can gather essential insights into the number of potential acquisition targets under evaluation and their respective stages, the rationale behind target rejections, points of delay and how a company tracks towards accomplishing its overall corporate development objectives.

Should this discipline of reporting be absent from your acquisition strategy, there's no need to worry. A simple adjustment via an M&A platform equipped with a pipeline management tool can easily fill the gap. 

Acknowledging the Necessity for Change

Creating pipeline reports manually to keep track of M&A or corporate development progress may be the status quo for many deal teams but it's high time for a change. Deal teams should be capable of checking the pulse of an M&A pipeline and the progress towards corporate development goals at any time, necessitating a shift from reactive to proactive reporting.

If we were to look at M&A pipeline reporting through a traditional or analogue lens, any PowerPoint report becomes obsolete the moment new information emerges. Moreover, given the range of M&A deal activities within a company and the volume of data involved, compiling meaningful, actionable pipeline reports using analogue methods can take several hours or even days.

Consider a company evaluating 500+ targets annually, with various individuals in a deal team managing deal origination activities and recording target evaluation outcomes such as strategic/financial fit, reason for rejection and the ultimate go/no-go decision in disparate ways. In such a scenario, crucial information such as the number of targets rejected in the due diligence stage over the past year or the distribution of targets by deal rationale at any given time may not be readily available when requested by the head of corporate development or a C-suite member. However, with automated reporting, this information can — and should — be available in real time via a few clicks.

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Understanding What to Track and Why:

A. Reason for Targets Being Abandoned/Put on Hold

Understanding the reasons why targets are abandoned or put on hold provides valuable insights. Are internal deal sourcing issues the culprit? Could poor opportunities introduced by intermediaries such as investment banks be the cause? Or does the problem lie in poor alignment across strategy, financials, products or services? Perhaps targets are not advancing beyond due diligence or market drivers beyond the company's control are in play such as inflated valuations pushing targets outside an acceptable range. Tracking this will shed light on the reasons behind your deal pipeline status.

B. Overall Pipeline Value (by Revenue) By Deal Stage

This reveals the potential revenue contribution assigned to targets at different deal stages. If most of the pipeline value is tied to targets still in the early Discovery stage rather than further along, it may suggest that targets are progressing through the M&A pipeline too slowly, thereby risking the achievement of corporate development objectives.

C. Split of Targets by Value Driver/Deal Rationale

This helps a corporate development or deal team understand the pipeline's strategic focus and establishes whether resources are being allocated to the right mix of targets. It also gives the company a holistic view of all potential deals and where the primary focus is at any given time, aiding M&A pipeline management.

D. Time to Move a Target Through the Pipeline

This metric reveals the proficiency of your target assessment and pinpoints any pipeline stages prone to causing delays. Should the evaluation process linger excessively, there's an increased risk of reliance on stale working data, stagnation within the pipeline or even competitors gaining exclusivity on attractive targets. The rate at which targets move through your M&A pipeline isn't merely about time management – it's a potent signal of operational efficiency, deal momentum and competitive edge in the M&A landscape.

E. Targets by Geography

This vital metric offers corporate development teams a keen understanding of the geographic focus within their pipeline. It’s an invaluable tool, particularly for businesses that have pinned their strategic objectives on geographic diversification. With this, companies can identify potential regions for expansion, decipher new market entry points, and concurrently manage a global portfolio of prospective deals. This geographic insight is pivotal in shaping an all-encompassing international M&A strategy, affording businesses a bird's eye view of potential opportunities and the ability to seamlessly navigate the global M&A landscape. It’s about understanding where your current potential deals lie, and where future opportunities may beckon.

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