This panel featured Paul DellaNeve, Vice President, Moog Inc., Ulrich Nicolaus Kranz, Member of the Board and Chief Strategy Officer, Kiekert AG, Norman Rafael, Vice President, Corporate Development and Corporate Communications, Armacell International, S.A. Moderating the panel was McDermott Corporate Partner, Tom Conaghan, from the Firm’s Washington, DC office.
Drawing from the panellists different experience, the discussion focused on how each company approaches business development. Philosophies differed between the panellists. While some companies focus exclusively on their own portfolio and seek out acquisitions designed to grow the existing business platform, others admitted that some portion of their time and energy is devoted to discovering novel or unique businesses that may not fit squarely within a company’s business lines. Strategic development officers must be open-minded and help their company “see around corners” to help discover new and complementary products or business lines, not just acquire more market share in existing markets. Strategic development isn’t only about growing immediate market share. It also involves understanding a company’s critical supply chain and how the company makes the products it sells. Sometimes changes in the supply chain, notably regulatory changes, can force a company’s hand and require strategic investments to help the company continue to make its products in a cost-effective way. In addition, strategic development officers need to understand how the market for its existing products may change and be prepared to help the company swiftly pivot into those markets to take advantage of new revenue opportunities.
Identifying the right target companies is also a complicated process, and each company tended to prioritize different things. Certainly, finding targets that contribute to top-line revenue growth is critical, but the panellist warned that cultural fit was just as important.
Our panellists shared that they spent a lot of time with target management to confirm that the target shares the same philosophy and would fit into the company’s culture. Valuation is also a key factor in identifying targets and completing deals. At this stage of their careers, our panellists had many interesting stories to share about the challenges involved in finding agreement with targets on appropriate value, and specifically how best to quantify the synergies that can be achieved in the business combination. Here is where legal advice can be most valuable, as the legal hurdles in integrating an acquired company, including from the point of view of human capital, commercial contractsand intellectual property, can translate into significant value gained (or lost) post-closing. Each of the panellists admitted that they have to start thinking about post-closing integration from the moment a target is identified.
Within their own organizations, it is important for strategy officers to deftly navigate the different internal constituencies within the company, from the businesses that are served to the other divisions, like the legal department, that help the strategy group execute on target acquisitions. Within companies with multiple business lines, not all of which may be in “growth” mode at the same time, it is important for chief strategy officers to deal with the politics.
The last portion of the panel was spent discussing the trendy topic of “disruptive technologies,” which can provide both opportunity and calamity for companies. Our panellists said that they are constantly looking at their space to try to make sure they avoid the negative impacts from the changing technology as well as find ways to capitalize on changing technology.
Paul J. DellaNeve, Moog, Inc. (1/4); Ulrich-Nicolaus Kranz, Kiekert AG (2/4);
Norman R. Rafael, Armacell International S.A. (3/4); Tom P. Conaghan, McDermott Will & Emery (4/4)