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Memoirs of an M&A Strategist: Why The Market Prefers Culture Over Size

If you have an interest in Culture and Mergers and Acquisitions (M&A) then you might like this post. It's focus will be the importance of finding the right person or company in a global market for M&A advice and the corresponding incentives which drive Strategists in this part of the global economy.

We have for the longest time wondered why London M&A activity has slowed for the bulge brackets but slowly picked up for the boutiques. It is seemingly a U.S. fad but could very well be a strange post-Brexit phenomena for investment banks in London.

One factor (for several reasons) could be the increasing importance of corporate culture between sell-side advisers and the client.

We wrote a post this week on Sainsbury's potential merger with Asda and its serial importance for food distribution and security in the UK. Not being a generalist myself, but being privy to a lot of transferable info as to the mindset of very senior executives, it is also understandable that culture is important to those seeking trust-worthy and reliable financial advise.

Sainsbury's board and their senior management team have a beautiful dilemma on their hands, finding an M&A adviser who can put in practice, their vision for the final entity. The high-end is drastically changing in this realm, something which London and New York have not fully internalised, yet.

And that's okay. People often fault IBD strategists for their highly nuanced, and sometimes arrogant behaviour, which underpins the type of proverbial headline that prohibits business investment.

Truth be told, Americanised euphemism and dynamism or not, in a competitive market where the driving factor for business is the next deal, culture inevitably becomes a priority.

Providing Cultural Value

Our friend Paris Petgrave runs a small startup business called WeLoveWork which focuses on the cultural aspects of matching applicants with hiring startups at the tech level (developers, engineers etc) predominantly, she also talks, quite frequently, on the topic of culture and its central importance to the corporate environment.

That leads me to my next point - cross-border tech M&A is often highly procyclical, more so than other forms of non-tech M&A, for instance, the Bayer and MonSanto deal.

How does procyclicality reflect cultural dynamics? Everyone who studied Strategy should know that M&A propogates the impulsive desires that, by design, drive the economic agenda in the developed world. And I for one do not see it as a far-fetched assumption to consider a Lazard to be at par with a Citigroup, for instance, in relation to the revenue they both see from their activity.

And with the economy being at the end of a tentative and formidable cycle, with no M&A activity for us to speak of (other than the solitary T-Mobile and Sprint deal), I put the fault for lack of cultural appeal firmly at the door of the sell-side investment banking division. Why? Because sell-side boutiques are outperforming them.

My colleague Varun Giridhar, a seasoned corporate financier and banker, recently interviewed Claude-Stephanie Ngningha, an M&A Executive at Citigroup in London, focused on Africa. Claude-Stephanie works on the sell-side, producing very efficient results for globally positioned clients including West Africa's largest M&A deal in 2016, as well as bespoke advise for very prominent UK clients. She speaks more about her work in the interview.

Her Francophone culture is important to her clients. She tends not to propogate the "Americanisms" which define the industry in so many U.S. and European banks. And while M&A requires a lot of skilled propositioning, which many people forget takes years of front office proning. IRR, Carve-outs and Valuations through to cash flow forecasting. My least favourite things in the world, but they are so valuable to have on the old resume.