I utilize a mercenary-style approach in order to rapidly assess the value of a project/business. Right or wrong, I have very successfully used variants of the approach over the last 20+ years. Admittedly, my orientation towards anthropology has had a significant influence on forming my methods, be it visioning, strategy formulation, M&A, etc. This is an approach that I developed while working at a boutique technology M&A firm many years ago and it was adopted as the standard methodology for all engagements.
It is a top-down approach that focuses on areas of “strategic relevance” and filters out anything tactical or operational. The logic is that if the vision & strategy are sound then the execution and mechanics are incidental.
The approach begins with a Societal Impact (SI) assessment. [As an interesting side-note, the Partners at the M&A firm at which I worked, had a rule that if the SI value was 30 or less, they would walk away from an engagement, regardless of the revenue potential.] The SI phase identifies the “high-value targets” and the biggest threats to those targets and informs the remaining phases with respect to the level of detail that should be explored.
With respect to financial projections, we do not ever ask for them from the principals as they are highly speculative, biased and ultimately, totally unreliable. This is the area where we bring our expertise to bear in order to assess the market or organizational value based upon the insights we gain from the SI assessment, discussions with the principals, analyzing the business model(s), assessing technology and employing other standard practices of due diligence.
The simple (yet extremely powerful) opening question that is always asked of each of the principals individually is;
Bear in mind that the societal scope of impact may be limited to the safe side of the corporate firewall but it is rare that any project or business exists purely for its own benefit without regard for some external stakeholders.
Answers to this question range from blank stares (meaning we never thought about it those terms) to, will shave 30 seconds off the process time to, will save lives. Regardless of the answer, this can provide valuable insights into the collective “mind of the project.” If the principals cannot clearly articulate their thoughts then the rest of the team will also lack a clear understanding of the vision and also, direction.
That is usually followed by;
The primary objective through this line of questioning is to ascertain the integrity of the vision and identify patterns of inconsistency among the principals. Each answer is rated qualitatively using a scale from 1-10, with 10 being highest or best.
The success of this assessment is largely dependent on the M&A analysts experience and their ability to see in, through and beyond the obvious, which is what a good analyst should be capable of doing. Given that M&A engagements are typically very short in duration and time is of the essence, this is not the place for OJT for inexperienced analysts. This is the domain of the “gunslinger”!
A sentient analyst somehow knows when they walk into a room if the ceilings are an inch lower than they should be. He or she may not know why, but is able to discern that something does not feel right. A good M&A analyst is able to walk into a room and rapidly assess who and what has the most significant influence on the success or failure of the initiative and is a keen observer of behavioral traits that will inform the entire assessment of the initiative .
I do not in any way mean to trivialize the complexity of M&A but if this simple process is executed well, the strategic value to the rest of the M&A activities are immeasurable and the accuracy of the final deliverable will be far greater.
At the end of the day we must all ask ourselves, “what is my societal impact”?