The link between Design and M&A
Introduction
Probably you’re like many other people who have never heard of M&A, however most of us has seen movies like Margin Call, Wolf or Wall-street. This is mostly focused around M&A and investment Banking, a field which according to the movies is hardworking 80 hours + and all the employees are male and coke sniffing snobs. Although for some companies this might be the case, it is more the culture of the company rather than the field itself.
In this article I will discuss what I learned from working in M&A and the link with Design.
Mergers and Acquisiton (M&A) means the buying and selling of companies. An important aspect of this process is called the Business Valuation. Here based on business metrics, economic forecast and professional judgement the M&A specialist “calculates” the value of the business. Why I put calculates between quotes is because determining a value is always an estimation and therefore is no rocket science. A bottle of water has a value of $1 in the store, but in the desert you would be willing to pay up till a $1.000? So this is the same with valuating a company the context and the timing are of main importance in this process. Therefore the skills you need as an M&A advisor are not only being able to do economical calculations in Excel, and understanding business models but also understanding psychology. Later in this article I will go in to more depth.
A little story
A small example, you are the owner of a little supermarket store, and after 5 years you and your wife decide that you want to move somewhere else and you have to sell your store. This is the point where the M&A specialist comes in and starts analyzing the business, the market, the customers, etc. and as such ends with a business valuation and starts to find a potential buyer.
Important in this process is that the business valuation does NOT equals the price. The (economical) value is the calcluation what something is worth based on cash flow analysis and other financial metrics and the price is what someone is willing to pay for it. Which can be a huge difference.
Now that you have a little idea what M&A is, I’ll start to create the link with design. I have never been a full time designer, but all my life I’ve been interested in the power of design and how much impact this has on consumer behavior. As such I’ve studied behvioral economics and design, and started working as consumer behavioral analyst. After a while I felt my strength is being a generalist, and as I was working as a specialist in I decided that I needed to change the sector in which I worked. As such I started working as a consultant in a M&A company. My believe was that I had to regain all of my economic knowledge and improve my mathematical skills, however soon I learned that the art of M&A is not in numbers but in all the aspects that come to play with a good design. That is what I want to share with you today. While working in the M&A Field I found many similarities with design, but more important I saw gaps that each field could benefit from. I will start explaining the similarities between the two, before going on to with what Design could learn from M&A and what M&A should learn from design.
At first impression you think these jobs have nothing in common, economic calculations and deal negotiating how can this be related to design? Well let’s start with the most important both of both: RESEARCH.
Research: Before you should start diving in to the company’s cashflows or developing wireframes you need to do your research. For M&A you need to know the market in which the company is active, what are the economical forecasts of this market and what might be the reason of the client to sell his company (where there some good or bad news messages?). The same holds true for design, however here you focus primarily on the end user of the product. But you have to take in to account what are the developments in the market regarding new technologies and design principles, what device should we design for etc. As caption obvious would state here Research is for both fields necessary to get to the desired outcome.
Asking questions: You could scale asking quesitons under the header of doing research, however I pull these apart because asking questions I’m referring to talking with you end users or client. In the case of M&A it is crucial to ask the client what his motivation is for selling the company, and by asking open questions figuring out whether what he says he wants is actually what he wants. You probably can already see the link here with design. Asking your users questions is key, but more important is asking your users open questions and never take an answer for granted but always validate it. Because if designers took the users feedback for granted, the Iphone would have never been created and we would be riding faster horses these days. Therefore asking the right and open questions is for both professions crucial! I want to go into a bit more detail of the why questions below.
One of the most important questions in life and especially as a M&A consultant is: “why do you want to sell your business” in the first place? This because the process can be very expensive and what is your alternative. Sometimes we believe that the only money that is valuable is in our wallet/bank account, however the money we have invested in a company, house or other valuables can only be seen as money with value.
Especially these days with an interest of 0% on your bank account in order to sell your business you need a good alternative for your money, else it dissolves in no time. So here as a consultant you have to dig deep to find the real goal/problem why someone wants to sell his business.
In design this is the same, before you start with a project the most important question to ask is why. What is the problem that you’re trying to solve, and maybe you come to the conclusion that design is not the best way to solve this problem right now, or maybe you need more than just design.
Many people/companies believe that design or selling a business will solve their problem, however often this is not the case. Therefore we as consultants / designer should really identify the why behind our clients desire before you start a process which either not meet up to their desires or that they aren’t able to afford during the process. This will not only strengthen the relationship between you and the customer but also will increase the likely hood of getting a positive word of mouth and getting long term customers rather than single shots.
Empathy: How often do you read about the importance of empathy? Probably not often enough, because empathy is one of the most important skills in both professions. For M&A this goes in to the writing of the report and the story you tell your potential buyer. Framing and storytelling skills are here essential. Is this company underperforming, or is it having a great potential for rapid growth? Same company, same results different story and different feeling for the client. Here it is key that you can emphasize with you reader or potential buyer, what does he want to read and how should I chose my words, such that he is most willingly to go on with this deal. In the field of Design empathy is just as important, understanding your users situation is essential for designing the features that your customer is actually looking for, rather than just designing these because it is cool to do. Therefore start reading more and train your empathy!
Iteration: You think probably that with M&A you get the clients financials analyses these and the markets reports and that this is quite a linear process, well think again. as this is quite the opposite. Dealing with clients is just as with design dealing with different moods and different information. As such when one little thing chance in the financials all often all your calculations, report writing and conclusions will probably change. This is the same with design, the key is here to iterate on your process once you have a version 1.0 test is fast and improve to version 2.0 until you end up with a version that is good enough to release and than still keep on improving further.
Pitching: Whether you’re designing a product or writing a report for a deal to be done, in both cases you have to be able to prepare and held a good pitch. Telling a coherent story and persuading both parties to go on with the deal is key for M&A. Thereby you have to underpin all the decisions you made and as result the final outcome. In Design you have to do the same. Why do you include x rather than y? Therefore knowing how to pitch a project or a report is for both professions key!
As you can read above there are quite a lot of similarities between both professions. Now again the work you deliver is a lot different, designing an app versus closing a deal between 2 companies. I just want to highlight how much similarities when most of us still think that these are two different worlds. I’ll now dive in to the differences and what both fields could learn from each other.
Why I touch upon the similarities is with the goal to break the idea that people have that business/economics is not a creative profession, and the other way around that design is not related to business in anyway. Now I want to highlight the most important skills that both fields could learn from each other.
Financial analysis: What I believe is the most important for Design to learn from M&A is the financial analysis. It still happens quite often that a team is working hard on a digital, but forget to calculates the ROI. How much value will this tool most likely bring to the company? This is not only essential when determining the price for your client, but also for strengthening your business case internally. Still it happens a lot that we are so focused on building something cool that we lose track of the financials on the way due to the sunk cost fallacy. Therefore I believe that Design should focus more on the business aspect, and designers should understand how to calculate business value.
Being open minded: What I mostly like about design is that a designer approaches a problem with an open mind. They don’t start directly with coming to conclusions and summing up the facts. This is often the case with M&A, you start researching your clients business, or you already know the field and you take all the data as facts. This limits you in the way that many M&A agencies miss out on asking relevant questions which they assume to be obvious anyway. Therefore I strongly believe that M&A specialists should be open minded at all times, and listen to the client and talk with people rather than summing solely summing up the facts from the market. This will broaden the view of the M&A advisor and might come to new great insights!
Now I want to dive more into the different between the type of thinking between business and design.
The most important difference between business thinking and Design thinking is that with business thinking you use data and analyze problems by the amount of solutions. And as a designer you start by being open minded and expanding the thought process before you zoom in. As such designers tend to come up with different possible solutions and are able to deal with a lot of uncertainty.
However at the same time both the designer as the business thinker are goal driven and problem solvers. I believe The key therefore is to find a right balance between the business and the design thinking. Such that you don’t jump to conclusions in an early stage, but that you do use the Pareto Efficiency principle when necessary.
In this article I started to explain what M&A is and than went on to explain the differences and similarities between both M&A and Design. Also I touched upon what each field could learn from each other. So I strongly believe that Designer should broaden their business knowledge, and at the same time M&A professionals should be more open minded when approaching a problem. Finally I quickly went in to the business mindset versus the design mindset and what in my opinion the ideal combination is between these two.
I hope I’ve opened the door to the financial or design world for you and that the gap between these fields will become smaller. I believe that this will lead to great development in the future and will result in innovative products in the future.
Thank you for reading this article and what do you think is the most important skills that a designer or m&A specialist could learn from your field?
Have a great day!
Maarten van Hoogdalem
Are you interested in reading more? Take a look at one of my following articles.
https://medium.com/@mdjvanhoogdalem/the-first-5-days-of-ux-ui-at-ironhack-be59d839d602
The link between Design and M&A
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