Who am I Talking To?

Who Really Influences M&A Deals

How does an M&A Deal begin? With a Relationship. But this relationship can have many colors, shapes, and scents.

When an entrepreneur thinks about starting a conversation that could end in an acquisition, the first thought is often to meet with an M&A executive from the buying company. But very often, this is not the area where the conversation should begin.

Many of the best deals are born without a deliberate intention to end in a merger or acquisition, and therefore begin through relationships with business areas, high-level executives, or even between CEOs.

Let's explore the interlocutors it makes sense for you to approach in each case.

Some Examples We've Already Discussed

Looking at the deals we've already studied here in greater depth, it's easy to see the variety of interlocutors (and the areas where they're found) that can culminate in a merger or acquisition.

Nubank's Acquisition of Plataformatec

Plataformatec was Nubank's first acquisition and is classified as an Acqui-hire. This is because the bank discontinued the consulting firm's operations and kept only its team, allocated to its internal areas.

The conversation began with executives from Nubank's development areas, who were clients of the consultancy, meaning they already had some of their professionals allocated there. These executives could see the value this team added to the Bank and the potential to internalize it. The interesting anecdote is that one of them spontaneously mentioned the idea in a joking tone to Ptec's CEO: "you already have so many people here that we should just buy you guys already." And so it was done!

Intuit's Acquisition of Zeropaper

In this case, where the buyer made a move to enter Brazil using an acquisition as an accelerator, the relationship was with the international expansion executive. Well, it makes perfect sense. For her, it was a "make or buy" decision. In other words, she could build an operation from scratch in an unknown country or acquire a local player and gain initial speed and invaluable know-how. Disseminating the idea internally at Intuit was easy after she understood how this second path would make more sense.

Alelo's Purchase of Onyo

My first startup, Onyo, was acquired by Alelo and became a new business unit, Pede Pronto. This horizontal expansion movement began with a partnership that was operationalized by a business executive. He saw the opportunity to grow revenue and generate synergies organically and sold the idea internally until the deal materialized.

My Deals at TOTVS

As head of M&A, on the other hand, several deals I handled happened through relationships that started directly with me or my area. In other words, the M&A area is not excluded, but it's difficult to know its strategic agenda from the outside. Moreover, the conversation with this area starts more deliberately as a potential deal. Having a business sense, appreciation from other areas, and an influential advocate for the relationship beyond the merger/acquisition, can make everything more palatable and smooth.

What Defines Where and With Whom This Relationship Begins

Ultimately, the Thesis will direct to a type of relationship that can lead to the deal, and the type of relationship is aligned with a specific area. There is no single path, nor a rule set in stone, but if we're talking about a business expansion, there must be a business area for which it makes sense. If we're talking about an acquisition of resources (human, material, or technological), they must be of special value to a particular area. Based on this rationale, we can establish a greater affinity of each thesis with a specific area where you should find the ideal interlocutor.

Thesis / Role Relationship

Let's try to systematize this. If it were possible to build a table with this thesis x interlocutor role relationship, what would it look like? Well, you know what, let's risk building it, even knowing it will be wrong to some degree!

Business Expansion

• Increase in Market Power: Business Area Executive

• Horizontal Expansion: Business Area Executive (ideally with management over more than one business)

• Vertical Expansion: Client/buyer of your product/service or from whom you buy/distribute the product/service

• Geographic Expansion: Geography leader (e.g., Head of LATAM) or international expansion

• Market Access: Business unit executives, channels, or commercial area

Product / Technology

• Product Diversification: Product or technology area (for whom the acquisition is a "make or buy" decision)

• Technology Acquisition: Product or technology area (for whom the technology normally has strategic value)

Resource Acquisition

• Acqui-hire: Your client area (if you're a service provider) or areas that need resources with the main competencies of your core team

• Strategic Resource Acquisition: Buying or using area of strategic resources

Other Strategic Moves

• Regulatory Compliance: Legal/Regulatory Area, Strategy/M&A Areas, CEO

• Ecosystem Expansion: Partnerships Area, CEO, Strategy/M&A Areas

• Acceleration of Innovation / Digital Transformation: IT Area, Digital Area, Business Areas, Innovation Area

As the table makes clear, there is a wide range of areas with which your relationship can begin. The conversation is not restricted to the M&A area. But a doubt may remain: should you talk to several of them?

Should I Open Several Doors?

In general, yes, you should open several doors. But not in the same company. It might make sense to build relationships in two different areas of the same company, but trying on all sides can communicate an anxiety that will work against you.

On the other hand, opening different doors in different companies brings a diversity of theses that favors a good deal. In the case of Plataformatec with Nubank, for example, the company had a merger proposal with a competitor, which was received directly from the CEO. Then it opened the conversation with the technology area, which was its client area and ended up enabling the acquisition.

Eventually, the best buyer may not be the one who will want to pay the most, because it doesn't make much sense for the thesis, but competition can justify a higher price, as long as another potential buyer has a thesis that justifies it, as happened in this case.

Opening several doors is positive, especially if we want to create a network that can trigger competition for the deal. But a little selectivity and focus are always welcome, otherwise this task can grow to take up your full dedication.

A Good Champion

M&A doesn't need to start with the M&A area. But it should start with someone influential.

Sometimes it's difficult to assess from the outside, but for a partnership (for example) to have a chance of turning into an acquisition or merger, this idea has to be well transmissible.

What makes an idea more or less contagious is similar to what makes a disease more or less transmissible. The virus (the idea) itself can be efficient in transmission, but the medium, the host must also contribute to this.

Disgusting analogy, isn't it? What I mean is that someone influential is capable of convincing the organization even of a bad idea. Find that someone!

If your interlocutor is not a good Champion, you can try to navigate the structure, seeking exposure. Their boss? The boss's boss?

Of course, nothing beats a partnership that delivers results to gain exposure, but it's not enough. If your business partner is not very good at personal marketing in the organization or selling their ideas up the chain, who might get stuck in the deal is you.

The champion is who will make the deal happen because they will speak passionately and be convincing about the idea. Recognizing who are the talented people in this who can put the idea into flow is a critical success factor.

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