After understandably pausing during the initial phases of COVID-19, M&A deal activity within the high technology sectors has roared back and is likely to continue to be brisk for the rest of 2021 and into 20221. In the first four months of 2021 in North America alone, more than 50 transactions greater than $500 million—valued at $140 billion in aggregate2—have been announced. This continues a global trend over the past 18 months of significant consolidation in the semiconductor segment, strategic expansion within the software space, and portfolio restructuring within hardware. In addition, cross-sector deal activity has also continued, both across technology sectors and from outside, non-technology buyers. High Tech companies are also searching for new operational capabilities, new business models, and new vertically integrated offerings (device + service + software) as the primary rationale for their acquisitions.

The common thread running through many of these deals is a search for sustained competitive agility, which involves answering three key questions:

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1

Where do we want to play?

2

What do we want to disrupt?

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3

How do we win?

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Different transactions may emphasize one or more of these dimensions. For example, in the semiconductor sector, quickly achieving scale and securing supply are two key answers to “How to win?” while in the software space, driving better enterprise collaboration and security are among the answers to “Where to play?”

“What to disrupt?” is more difficult to answer. While many deals are meant to be disruptive strategically, more often than not, they end up negatively disrupting core operations and ultimately, shareholder value. The way to avoid this outcome is to ensure your M&A strategy and playbook are in lockstep with your corporate strategy—which, while intuitive, isn’t always easy when deals are meant to accomplish different goals.

Consider, for instance, the main priorities of most High Tech companies today3:

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1

Shift to as-a-service

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2

Expand industry boundaries

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3

Reinvent the portfolio

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4

Modernize the enterprise

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5

Build resilient supply chains

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One way to look at these priorities is as answers to the three key competitive agility questions. But from an M&A strategy and execution perspective, doing so would only address half the challenge. Our research has identified where and why to look for deals, but it’s the responsibility of deal makers and management teams to figure out how to source, structure, plan, and execute the specific transactions.

This is where M&A playbooks come into the picture. Think of a playbook as a kind of cookbook with the ingredients and steps to plan and execute a given M&A transaction. Playbook components typically include everything from diligence questions to ask, to how to structure the planning process, to what you want to accomplish in the first 100 days after the deal closes. With deal activity growing, we’ve been hearing quite a lot about playbooks from our clients, and the main challenge they’re grappling with is one of fit. Traditionally, they’ve used a single playbook to support all or most all of their deal flow. But now, as they try to execute widely divergent deal types, that approach is breaking down and causing problems.

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Just look at the High Tech priorities, each of which is quite unique. While there will be some common elements, the playbook needed to execute a deal to improve a company’s as-a-service capabilities is going to look much different from the one designed to help reinvent a company’s portfolio. For example, a High Tech acquisition may be for a specific software or engineering capability to enable a recurring revenue product. This deal will likely close quickly and have a special emphasis on engineering talent, product integration, and new operational capabilities (e.g., subscription management systems and processes). On the other hand, with a deal geared toward portfolio reinvention, a company may first need to divest a large legacy operating division to free up the capital to grow a new data analytics platform business. This deal will likely take twice as long as the as-a-service one, involve regulatory scrutiny, and require complex Transition Service Agreements (TSAs). Thus, by extension, each will require a distinctly different playbook.

But playbooks aren’t the only things breaking down. High Tech companies also are experiencing M&A process faults—typically between the three major teams behind a deal: the deal team, the planning/execution team, and the sponsoring business unit team. When the process isn’t working well, teams can feel that a deal is just getting “thrown over the wall” at each step of the process. As an example, if you’re on the planning team, you might wonder why the deal team didn’t ask more detailed diligence questions in a particular area of focus for you or, more simply, why you didn’t have the chance to participate in the diligence. If you’re in the sponsoring business unit team, you might question the overall deal thesis: How were you assigned the targets you have been given, which seem unachievable in the current competitive environment?

Executing an acquisition, of course, is rarely easy, and we plan to go into more detail on many of the points above in future blog posts. In the meantime, we urge deal teams to “measure twice and cut once” to ensure all of the critical aspects of your corporate strategy and M&A strategy are in alignment. With deal activity accelerating post-pandemic, you can’t afford to be out of step.

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1Bloomberg
2Accenture Analysis
3Accenture Research

Copyright © 2021 Accenture. All rights reserved. Accenture and its logo are registered trademarks of Accenture

Disclaimer: This content is provided for general information purposes and is not intended to be used in place of consultation with our professional advisors.

Sam Panda

Managing Director – Accenture Strategy


John Kinnaman

Managing Director – Accenture Strategy, Communications, Media and Technology

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