Similarities between a great round of golf and a successful M & A transaction
Boot Ranch
Two weeks ago I played two rounds of golf. Saturday at Boot Ranch in Fredericksburg, Texas, and Sunday at Champions Golf Club in Houston, Texas. Both courses are wonderfully maintained and a great golfing experience. Saturday I shot 84 and Sunday I shot 78. I did not strike the ball 6 strokes better on Sunday. I just scored better. I always score better at Champions than I do at Boot. Boot is not harder than Champions, in fact, Champions has hosted the Ryder Cup, The men’s US Open, US Amateur, Houston Open, the Nabisco Championship, The Tour Championship, and will host the 2020 Women’s US Open. So it would be hard to argue that Champions is an easier golf course than Boot. So why do I consistently score better at Champions?
In thinking about that question I can say that there are three reasons why I consistently score better at Champions than I do at Boot. The first, and most important, is that the course and the playing conditions at Champions fit my game better. Champions is a relatively flat, heavily wooded golf course with only minor elevation changes. The same type of golf course I learned to play golf on. Also, at Champions the wind is rarely a major factor in club determination. Boot is a Texas hill country golf course with lots of elevation changes, fewer trees and lots of wind the majority of the time.
The second reason I play better at Champions is that I have been playing Champions longer than Boot. I started playing Champions in 1967. I started playing Boot in 2011. Needless to say, I know the golf course at Champions. I know what club to hit off the tee and from the fairway. I know which way the putts are going to break on the greens. Usually the only question I have is how fast the greens are on the day I am playing. At Boot I am still hitting from places on the golf course I have never hit from before. On occasion the greens will still surprise me with their breaks.
The final reason I score better at Champions than Boot is I have more confidence in playing Champions. Because I feel more comfortable on the golf course at Champions I am more confident in my decisions. Because I am confident in my decisions regarding club selection and not second guessing myself I execute my swing mechanics better. At Boot I am constantly second guessing my decisions. Is this a one, two or three club wind? How much is the side hill lie going to affect my shot? More times than I would like, second-guessing my decisions results in poor swing execution.
So how does the above babble relate to a successful M & A transaction? Let me explain. Take my first point above; choosing a course that fits your golf game. The odds of you having a successful acquisition are greatly increased if your acquisition target fits within your current business model. This is not to say that your acquisition will not be successful if you acquire a business that does not fit within your current business model. However, you more than likely will have to work significantly harder to make it successful. For example, if your acquisition target is within your current business model you are going to have a better feel and understanding of the customers, venders and potential financing sources. This knowledge of just these three critical stakeholders in your acquired company will enable management to make important business decisions timelier. Being able to respond to events quickly is extremely important to running any successful business, let alone a business recently acquired.
Having course knowledge is the second point I made above. The more experience your management team has in the industry, market segment, and the revenue cycle the acquisition target company operates in; the more likely you are to have a successful M&A transaction. The more familiar your management team is with the operations and the operating environment of the target company; the more likely they will know what decisions need to be made (hitting the right club). They will also know when to make the decision (which way the putt is going to break).
Finally, the management team will have greater confidence in running the acquired business if it is within the current company’s business model and they are familiar with its operations. The management team will be less likely to second-guess their decisions. This should result in better execution of the integration and operating plans for the acquired business.
Many of you are saying that the pro golfers play a different golf course every week and they still play very well. Some of you are saying that there are companies that have acquired businesses in completely different industries and/or markets from their core business and been successful. You will all be right! Pro golfers can play well on a different golf course every week. But they are “PROFESSIONAL” golfers. They also have a support team consisting of swing doctors, sport psychologist, trainers, and others. Their job is playing golf. They are not like you and I that have to go to work Monday through Friday and play on the weekends. Yet even the Pro golfers still choose not to play certain tournaments because they feel the tournament course does not fit their game. The same is true for management teams that are successful in making acquisitions that are out of their core business. These companies are very experienced (Pros) in acquiring and integrating businesses into their operations. Most of these companies have in-house acquisition teams whose sole purpose is to identify quality acquisition targets and run the due diligence process. Once the acquisition is completed they then establish a dedicated integration team to efficiently and effectively integrate the acquire business into the current business. Most businesses do not have the luxury of establishing these dedicated teams.
In the coming weeks I will have more on the similarities between golf and running a business.
