Our popular January 30 webinar, Corporate Development Outlook: Politics, Processes and Predictions, left a robust pipeline of unanswered questions for our panelists.
We caught up with Alan Konevsky of Mastercard, Justin Gans of Northrop Grumman and Jonathan Rothenberg of GlobalLogic to answer a few of them.
1. Based on your experience, what's been the single most important factor to maintaining a competitive edge in your respective market?
Jonathan: I think it’s the ability to execute a transaction swiftly, with enough confidence in your ability to run the business post-deal that you can put forward a competitive valuation.
Justin: From an enterprise strategy standpoint, knowing how to differentiate yourself and translating that into targeted investment criteria in terms of company locations, technologies etc.
Alan: Have the right discipline to stay on your strategic course and financial, cultural and operational bottom line – and a firm integration and go to market plan. Have the right process to manage the deal in a way that allows you to answer the core questions early. And be willing to walk away if you must.
2. Which disruptive technology trend (AI, Big Data, cybersecurity or blockchain) do you see as the shortest-term risk to current business?
Jonathan: I think the shortest-term risk may not be anything technological, but rather a return to a normal interest rate environment.
3. What changed in the corporate VC landscape to make it potentially attractive, when it wasn't in the past (directed to Justin Gans for his earlier comment)?
Justin: That’s a great question. In our case, it is the increasing impact of new commercial technology on the defense world. Advanced commercial technologies are more and more being utilized in military scenarios and, even more worrisome, other countries and terrorist organization now have access to those technologies. That has caused us to start looking in new places like Silicon Valley for important investments to maintain our competitive edge.
4. How have you seen mismanaging cultural compatibility extinguish deal value during the integration stage?
Alan: Aside from integration – and I view culture as an element of that in a sense – cultural strategy is probably the key element that can differentiate success from failure. And it’s one you need to be very conscious about. Cultural strategy in deals does not mean homogenization of new into the old. But it does mean consciously deconstructing the culture of the newly acquired business or partner – and, as importantly, your own, in an honest and focused way – and then figuring out what elements are essential to the continued success of the business and which ones are not and how the old and the new can be reconciled, especially where there are critical cultural ingredients about the newly acquired business that must survive in order for the DNA of that business – what attracted you to it to begin with – to still make sense post acquisition.
A common example is acquiring a small startup where the employees are used to functioning in a nimble way, but they get folded into much larger, seasoned organization that’s going to pull them apart. A successful integration may require allowing the startup employees to be more independent, and other cultural and organizational concessions.
Justin: The same can be true on the operational side. In one small acquisition, our government accounting policies and legal risk tolerance were so onerous the company’s business model crashed because it was unable to handle the extra G&A expenses.