Structuring the first M&A Team in a fast growing business

In our rapidly evolving industry, numerous enterprises have turned to mergers and acquisitions (M&A) as a strategic lever to accelerate their growth objectives, achieving varying degrees of success. Many of these corporations were initially founded by visionary entrepreneurs who assembled teams of sector-specific experts, such as those in SEO, technology, and product development. However, few of these leaders had prior experience in navigating the complexities of M&A transactions before embarking on their inaugural deals. Consequently, they often proceeded independently, which in some instances led to significant challenges and suboptimal outcomes.

Defining a great M&A strategy

It’s critical to take the time to define your strategy, by drawing the following points:

• Are you trying to achieve market expansion ? Meaning reaching new clients in countries you’re not performing enough.
• Are you trying to diversify your revenue pillars ? Meaning adding new revenue sources to your core-business, in order to de-risk your activity. If yes, what new revenues are you willing to explore ?
• Are your trying to get an edge on a specific technology ? Meaning trying to have a key factor of success that your competitors won’t have.

Once your ambitions are designed, the next step is to define the research criteria :

• What size are you looking for, in terms of revenues and Full Time Employees ?
• What KPIs are you looking for ?
• What tech stack would be the best fit ?
• How confident are you on your abilities to integrate new colleagues ?

TGC’s Tips : it’s really important to be humble on that first stage, because it would be time saving to know what the business is really looking for and what is too big or too small. Otherwise, the risk is to spend time on opportunities that lead to nowhere and then, impacting your credibility on the market.

Assembling a Core-Team

Once the strategic framework is established, the subsequent critical step is the formation of a dedicated core team. Mergers and acquisitions (M&A) are time-intensive processes that yield results only when key stakeholders are deeply engaged. Based on our extensive experience, the involvement of internal experts is essential for conducting in-depth analyses and executing due diligence. However, the limited availability of these resources often poses a significant challenge.

To address this, we recommend structuring the core team with the following key roles:

• Chief Financial Officer (CFO): If available, the CFO provides crucial financial oversight and strategic input.
• Chief Technology Officer (CTO) or Technical Lead: This role is vital for evaluating the technological infrastructure and capabilities of potential targets.
• Project Manager: Responsible for planning, coordinating, and ensuring the timely delivery of tasks throughout the M&A process.

In addition to the internal team, leveraging external advisors is a best practice. These advisors bring invaluable assets to the table, including an extensive network of potential sellers and a repository of ready-to-use documents and templates that streamline the paperwork process. Their expertise and resources can significantly enhance the efficiency and effectiveness of the M&A endeavorast. And mainly, because they know how to find targets and how to make the transaction happens.

A good advisor is also here to defend your interest:

1. Maintaining confidentiality
2. Negotiating the deal with the best price AND the best deal structure (such as upfront, or payment on performance)
3. Anticipating the Post Merger Integration.

Leverage industry knowledge

Another significant risk in M&A is the information asymmetry between sellers and buyers. Sellers inherently possess comprehensive data and metrics about their business, giving them a clear understanding of their worth from the outset. In contrast, buyers often rely on publicly available data and the information that sellers choose to disclose. This disparity can lead to an imbalance in negotiations and decision-making.

To mitigate this risk, it is crucial for buyers to equip their teams with advanced Market Intelligence software. Such tools enable buyers to track past transactions, analyze comparable business valuations, and gather a wealth of market data. By leveraging these resources, buyers can gain deeper insights into the market landscape, identify trends, and make more informed decisions.

Furthermore, building a strong network within the industry can facilitate access to insider knowledge and off-market opportunities. Attending industry conferences, participating in professional associations, and fostering relationships with key players can provide valuable insights that are not readily available through public channels.

In essence, the more data and intelligence a business can gather, the more empowered it becomes in the M&A process. This not only levels the playing field but also enhances the buyer’s ability to negotiate effectively and make strategic decisions that align with their long-term objectives.

Building a strong network

Most businesses are not for sale, until they get contacted by potential buyers. As M&A consultant, we often hear from targets:

« We’re not actively looking to sell, but for the right price we can talk »

Reaching M&A consulting firms such as The Gambling Cockpit or some of our competitor to share your ambitions is a great way to fuel your pipe, by sharing your research. But not only M&A firms, attending events such as ICE, IGB L!ve and others are great chances to connect with other entrepreneurs that could be interested in discussing their exit.

Having ran successful transactions that the Press talked about is also a great way of having inbound deals.

TGC’s recommendations

As a consulting firm specialized in iGaming and having ran multiples M&A projects for small businesses, that don’t have any M&A team, here are our insights:

1. Outsource the job: the consultant is fully dedicated to your ambitions, reaching targets and delivering deals on your behalf.
2. Identify key stakeholders and free their agenda: people needed during the preliminary analysis (such as SEO) must have some time dedicated for those tasks.
3. Trust your consultant and the process: defining your strategy and reaching the right targets might takes time, but is mandatory to deliver good results.
4. Don’t over-hire: once you’ve decided to build your M&A team, recruiting a C-level isn’t the best idea. The company mostly needs people delivering the strategy the CEOs defined, instead of having a new intermediary adding inertia.

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