M&A Executive Forum

The Future of the Deal

March 8, 2018
Opening Remarks
Trevear Thomas
Principal, Deloitte Consulting LLP
Who’s in the Room?

trillion total Recent M&A Activity (March 2015 – March 2018)

market
trillion in $5.5 capitalization of
$2.8 total annual all publicly listed All
revenue companies Transactions • Total number of deals: 1,912
(buy- and • Total disclosed deal value: $1.0 trillion
sell-side)

Headquarters in 31 US states

Divestitures • Total number of deals: 877

or Spin-Offs • Total disclosed deal value: $304.3 billion

21 companies domiciled overseas

Operations in 110 countries in all regions of Cross-Border • Total number of deals: 798
Transactions • Total disclosed deal value: $366.5 billion
the globe

Source: Thomson Reuters

M&A Executive Forum Survey

Most Significant M&A Challenge Greatest Influence on Deal Activity

#1 Cyber Security (17%) #1 Deal Valuations (26%)

#2 Synergies (12%) #1 Technology Disruption within

Industry (26%)

#2 Proper Target Identification (12%) #3 Capital Market Volatility (14%)

 Technology sector led US M&A activity, by both
value and volume, in 2017

US top 5 sectors by M&A value ($B) US top 5 sectors by M&A volume

Technology $238.5 Technology 2,284

Real Estate Travel, Hospitality

$160.6 1,806
& Construction & Services

Real Estate
Oil & Gas $158.1 1,688
& Construction

Media Consumer Products 1,012

$116.4
& Entertainment

Travel, Hospitality Industrial Products

$114.9 829
& Services & Services

Source: Thomson Reuters

The Art of Decision Making in M&A
Michael Roberto
Trustee Professor of Management, Bryant University
 DECIDING
HOW TO DECIDE
PROFESSOR MICHAEL A. ROBERTO
BRYANT UNIVERSITY
MARCH 8, 2018
“IF YOU HAVE A YES-MAN WORKING FOR
YOU, ONE OF YOU IS REDUNDANT.”

“A FEW YES MEN MAY BE BORN, BUT

MOSTLY THEY ARE MADE. FEAR IS A
GREAT BREEDER OF THEM.”
 I SAID, “EARLY, OFTEN, UGLY. IT’S O.K. IT
DOESN’T HAVE TO BE PERFECT BECAUSE
THEN I CAN COURSE-CORRECT MUCH,
MUCH FASTER.” NO AMOUNT OF UGLY
TRUTH SCARES ME. IT’S JUST INFORMATION
TO MAKE A DECISION.

Source: New York Times, Corner Office, August 12, 2016

Tendency for people to escalate commitment to a course of action in
which they have made substantial prior investments of time, money, or
other resources.
Commitment refers to the tendency for
CEOs and merger-acquisition teams to
deepen commitment, to “up the ante”
and even rationalize bad news in order to
negotiate a deal. Assumptions made later
and later in a deal that is having difficulties
have a way of getting more and more
suspect. The bearer of “bad tidings” in a
hotly pursued deal has a chance of being
executed.
- Joseph McGann and Roderick Gilkey
TENDENCY TO FOCUS ON INFORMATION THAT WILL CONFIRM WHAT WE ALREADY
BELIEVE, AND TO AVOID CONTRADICTORY DATA
PRESSURES FOR CONFORMITY THAT ARISE WITHIN GROUPS, LEADING TO PREMATURE
CONVERGENCE ON A SINGLE ALTERNATIVE
Steve Tobak
PSYCHOLOGICAL SAFETY WAS FAR
AND AWAY THE MOST IMPORTANT OF
THE FIVE DYNAMICS WE FOUND.

JULIA ROZOVSKY,
GOOGLE PEOPLE OPERATIONS
 A,C,B,D

A,C,B,E
Groups consistently A,C,D,F
spend too little time
discussing unshared
information.
A,C: Common to all three people
B,D: Shared by two people
E,F: Unique to one person
People exhibit close-minded behavior when they perceives themselves to
be experts, and thereby suppress challenges to the conventional wisdom.
 In the PreMortem exercise, the team is told
to imagine that it is now some time in the
future — say 6 months from now. We are
looking in a crystal ball, and what we see is
terrible. The plan has been a disaster.

Gary Klein
• GET JFK OUT OF THE ROOM

• SUSPEND THE RULES OF PROTOCOL

• SKEPTICAL GENERALISTS, NOT DEPARTMENTAL SPOKESPEOPLE

• SPLIT INTO SUBGROUPS, GENERATE AND DEBATE ALTERNATIVES

• EMPLOY DEVIL’S ADVOCATES

 Composition Context
Who should be involved In what type of
in the decision-making environment does the
process? decision take place?

Decision
Process

Control
Communication How will the leader
What are the “means of
control the process and
dialogue” among the
the content of the
participants?
decision?
 Constructive Devil’s Advocacy Dysfunctional Devil’s Advocacy
• Objective is to encourage divergent thinking and to • Objective is to persuade everyone to adopt his or
open new lines of inquiry her point of view

• Shapes and influences the decision process, but • Tries to exercise veto power for those decisions that
does not dictate the outcome he or she opposes

• Seeks to generate more options • Tears down existing proposals without offering new
alternatives

• Share information freely with others so that others • Hordes information that might enable others to
may form their own conclusions engage them in a productive debate

• Asks lots of novel questions • Declares his or her opinion forcefully

• Acknowledges incomplete knowledge on a topic; •
recognizes ambiguous nature of situations
• Focuses on the extent to which assumptions •
underlying each option may be overly pessimistic
as well as overly optimistic
Asserts comprehensive understanding of a topic;
downplays uncertainty
Focuses only on downside risks associated with the
specific proposals that they oppose
The most common source of
management mistakes is not the
failure to find the right answers. It is
the failure to ask the right questions.

- Peter Drucker