Combine & Conquer - Real World Wisdom - Panic M&A

In the midst of M&A, while evaluating the target and exploring the fit, there is a question that most buyers don't pay enough attention to: "If the target ends up with a competitor, how will that impact you?"

Your Bid Isn't Made in a Vacuum

In competitive sale processes, there will be multiple buyers, strategic and financial, vying for the same asset. And while you come up with your bid price and structure based on what the target is worth to you, it is worth putting in that extra bit of effort to consider what a competitor could do with the target and how that might impact you. Use this to refine your bid, or to build flexibility into it.

What Could a Competitor Do With Your Target?

Here is how it usually plays out. You have done the work. The target is a good fit, the synergies hold up, and the price looks fine. Every number in the model says "this makes sense for us", so the bid goes in, comfortable and reasonable, with a bit of room left on the table.

That comfort is premature, because you are only comparing two scenarios: you with the target, and you without it. And in the second one, you tend to assume that everything else stays the same.

If a competitor scoops up the target, the market changes. The real comparison is you with the target versus a competitor with the target. Therefore, the value of winning the target is not just the value of the target to you. It is also the cost of the competitive situation you avoid. A rival that closes a gap, locks up something scarce or gains scale can and will leave you worse off than the status quo, because the ground under you has moved. If you do not think through these scenarios, you end up bidding softly at the exact point where you should be aggressive.

"But Isn't That Just Poor M&A?"

Now, you might think that M&A for the sake of eliminating competition, or for that matter denying the asset to a competitor, is not a good idea. You would be in good company if you think so. That is what David E wrote to Mark Z while they were discussing the acquisition of IG. And for defensive M&A in its pure form, that is fair. Buying an asset chiefly because a rival wants it, whether or not it fits your strategy, is a bad trade.

But that is not what this is. What we are talking about starts with your own strategy, and the competitor is one more input. And your strategy has to take a whole sky view of where you and your competitors are headed and what each of you is looking to accomplish, build or acquire.

Besides, Have You Seen Panic M&A?

Sadly, this whole sky view is rarely taken when companies evaluate M&A, and the "what if a rival gets it?" question is skipped with it. The team is busy with fit, synergies and price, and the competitor is treated as background noise. Then an attractive target goes to a rival and panic sets in.

Then comes the nasty jolt of losing an asset that actually made strategic sense, the dread of a changed future, and the furious hyperactivity of a team scouting for alternate assets in a mad scramble to catch up with the competitor. That is panic M&A, and it is a rather common phenomenon.

And the pattern that follows is remarkably consistent.

Standards slip. The question quietly changes from "is this the right asset?" to "what is available right now?" A target that would have been rejected earlier starts to look reasonable.

Rigour and price discipline erode. Timelines shrink because the competition has levelled up and the board wants answers and options now. Fewer questions get asked and focus shifts to winning at all costs.

The M&A strategy gets rewritten. It now boils down to "we cannot afford to stand still", which is panic, not strategy.

Integration is an afterthought. Buying an asset in a panic means nobody worked out how it fits. That is the bit that decides whether the deal delivers value.

Don't Be Like That

Don't be like that. Do the work before the process starts:

Map the downside early. For every serious target, write down what happens to you if a competitor owns it instead.

Keep a live pipeline. The lost asset should never be the whole plan. Alternatives should be warm before you need them, so that you are choosing, not scrambling.

Build flexibility into the bid. Stretch room approved in advance, structure that lets you compete on certainty and speed, and a clear view of where you stop.

And when you get the chance to buy a good asset, go for the win. Let the competition do the panic M&A instead.

---