Master M&A pipeline management by tracking these key 8 metrics as used by leading global M&A teams.
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.
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.
Create a custom deal board with your pipeline stages
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.
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.
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.
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.
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.
Build custom dashboards and report in real-time with one click
Monitoring progress against objectives and operational KPIs in real time is crucial for companies pursuing M&A with a goal of growth. Key growth metrics may be financial such as revenue and EBIT contribution from closed deals but could also be more qualitative like the number of employees onboarded as part of an acquihire or IP assets acquired, etc.
This helps understand how productive those working on deal origination/target evaluation are and highlights project owners who are consistently pushing targets to the next evaluation stage. Additionally, it helps identify whether a company needs to ramp up its deal origination activities to meet corporate objectives.
Monitoring the ratio of M&A deals successfully concluded to those evaluated is vital for refining your acquisition strategy. This metric acts as a dependable indicator of the effectiveness of your deal-making process, reflecting the precision of your target identification and the efficiency of your deal closure. A high ratio suggests that your process is finely tuned, adeptly converting promising prospects into profitable acquisitions. Conversely, a low ratio could highlight possible stumbling blocks in the stages of target screening, due diligence or deal completion, signalling the chance for procedural enhancements. More than a success measure, this ratio provides profound insights into market trends, deal sourcing quality and your team's competence in steering deals to completion. Therefore, keeping track of this ratio isn't just about tallying up results, it's an essential tool for continuous strategic advancement and optimisation in your M&A journey.
The way you track your M&A metrics directly influences the success of your corporate development initiatives. It's high time to rethink your approach if it's falling short. Harness the power of an M&A platform to ensure real-time, insightful and actionable reporting. It's not just about keeping pace with modern deal-making — it's about gaining a strategic edge. So why wait? Make the shift today, take charge of your M&A pipeline, and move closer to achieving your corporate development objectives. Remember, every decision backed by accurate, timely data paves the way for a successful acquisition journey.
Your initial 90 days set the tempo for your tenure. Here's a roadmap to ensure you make a definitive mark in these pivotal early days.
Master the art of decision-making in M&A with the Impact vs Effort Matrix. It's not just about prioritising initiatives; it's about aligning teams,...
Simple tips you can implement from today to improve your M&A process