In the course of the contemporary news cycle, mergers and acquisitions can get lost in the fog. They either seem to be happening at breakneck speeds or barely chugging along behind a veil of obscure or poorly reported details
As a result, we civilians tend to be left in the dust, along with some vague questions about what’s been happening lately in the world of business.
Maybe we remember that there was a buyout, maybe we don’t. And we certainly don’t have a solid understanding of how all these deals have affected the playing field.
Just take a look at the sheer number of entertainment industry mergers over the last couple of years. Disney acquired 21st Century Fox, MGM bought Epix, and AT&T bought Time Warner.
These deals are going to have a long-lasting impact on the world of entertainment and how we’re able to access our favorite content.
And yet it’s difficult to remember who purchased who and what the changes have been so far on a practical level.
But that general sense of confusion is exactly why we brought in an expert to talk us through the basics of M&A while also sharing the details of how he got started in this highly specialized field.
Saurabh Rajwade: The Man on the Inside
Saurabh Rajwade works with the Investment Banking division of top wall street bank LLC, where he dedicates his time to potential M&A transactions within the area of technology.
And while M&A is certainly where Rajwade has focused his talents, he has a varied past which includes some time spent in the field of engineering and IPOs.
For those who may not know, the work of someone in Rajwade’s position is to research and analyze a potential deal long before it takes place.
This means taking a long hard look at the nitty gritty details of each company involved. How well has this company performed over the past 5 years? The past 10? How well is it likely to perform in the future?
From there, complex models are used to help predict different performance factors, as well as opportunities for synergies.
The work is far too layered to describe in detail here, but as our discussion with Rajwade will show, all of these practices are crucial to making informed decisions about whether or not to move forward with a deal.
So how does someone get started in M&A? Is it something that calls out to you when still in college?
For Rajwade, some exploring had to be done first. Variety proved to be valuable, serving as a kind of sampler platter for potential paths that his career could take.
“During my internship, I had a chance to work on multiple products, namely convertible debt, IPO, and M&A. I enjoyed M&A more as it required bankers to understand the business in more detail. The people I worked with were very talented and I believed that I would learn more and become a good advisor if I worked on M&A assignments in the early part of my career.”
After that, it wasn’t difficult to decide to pursue a career in M&A. It offered compelling day-to-day work with the promise of upward mobility and success.
The next few years were spent gaining a deeper understanding of the many factors that need to be considered before business leaders can shake hands on a deal.
Dealing with Fickle Markets
Now we’re into the thick of it. We were curious how Rajwade and others in his position are able to compensate for the near-constant up and down activity of the markets.
“As an advisor you present the trends in the trading multiples of the company versus market and determine the reasons why the company is trading at a different level from the market. Acquirers view is usually medium- to long-term, limiting the impact of short-term market fluctuations on a potential acquisition.”
And so choosing to focus on the long-term trajectory of markets can help provide some insights that may otherwise have gone unnoticed.
It’s a clever way to work around the unpredictability of the stock market and national and international economies.
The Engineering Connection
Since Rajwade spent a significant amount of time as an engineer, we were interested to find out how he’s been able to utilize that skill set in M&A, which at first glance seems like a very different profession entirely.
And it is, but there are connections that can be made here, connections that help inform important decisions.
“I think engineering provides you with a great problem-solving skill set and makes you comfortable working with technology. As an engineer you are used to performing analysis on a big data set and those skills can be directly applied to performing financial analysis.”
But engineering skills provide much more than just the ability to sift through massive amounts of raw data to find trends and patterns.
The work of an engineer also includes a significant human element, one that can in turn enhance the experience of working in M&A.
“While studying engineering at a top school you develop a network of individuals who are working across companies in the technology industry. This network helps me to understand the recent trends in the industry and ultimately improve as an advisor.”
On Working with Volvo
But Rajwade’s diverse background doesn’t stop there. He also spent some time working with automotive industry giant Volvo.
The work gave him a first-hand look at large-scale production and the inherent weaknesses of such enormous operations.
“The big lesson was the importance of planning as even a small delay can disrupt the entire production line. The experience at Volvo helped me understand the manufacturing industry from a 360o degree perspective, which helped me in my next job as a strategy consultant.”
Value Creation in Tech
So let’s talk tech. After all, this is where Rajwade has concentrated his efforts. And it’s definitely an exciting time for tech. Tech headlines and mergers and acquisitions all sneak into national headlines on a regular basis.
Startup founders can rise to the status of modern-day rock stars, as long as their company remains in the good graces of the general public.
And we all know that major tech companies like Facebook and Google dedicate a significant amount of time and effort to buying out smaller tech companies that they can then integrate with their own operations.
Rajwade has plenty to say on the subject, as well as how startups can make themselves more appealing to potential buyers.
“For startups who need capital and have high investment costs, they should consider partnerships with companies in the same sector. With M&A there is a high possibility of achieving outstanding valuation as big players can derive significant value from cost synergies while selling new proven products in known markets.”
Proving the value of their product may be difficult for many startups, but it’s also a sure-fire way to attract the attention of big tech names and potentially sell the business for a high price.
Why it’s Fulfilling
From the perspective of a bystander, M&A may seem like a fairly cold and technical area of expertise. And it does indeed involve large amount of analysis and number crunching.
But for Rajwade, there are many elements of the work that can be incredibly satisfying. Above all others, he mentioned one aspect of the work that he enjoys the most.
“A sell-side M&A transaction for many mid-market companies is a once-in-a-lifetime event for the founders and senior management. As an M&A advisor, you are working round the clock to get the best value for the business, while ensuring the terms agreed to match client expectations. The most fulfilling aspect of working within the area of M&A is to receive recognition from the client’s senior management for the work and the outcome.”
This recognition makes all the hard work feel worth it. And it’s what has kept Rajwade motivated to continue his M&A work for years and years.
The Skills Behind M & A Success
Lastly, we decided to ask Rajwade about the skills that make for a successful career in M&A. He gave us a thorough answer that confirms you need several different key skills to really go far.
“The qualities that are must to excel in investment banking are attitude, knowledge of finance and accounting, being a team player, and attention to detail. You are always working in a team and you definitely need to maintain a positive attitude while working 16 to 18 hours a day. Accounting knowledge helps you to understand financial statements and adjust the numbers to make them comparable to industry standards. However, I think attention to detail is the quality that is most important as the banking team is responsible for due diligence, and negligence can be very costly.”
And of course, these skills are not only applicable to M&A. They can serve as great tips for just about any job that requires dedication and careful work.
We hope that our discussion with Saurabh Rajwade has helped you to gain a more detailed understanding of all the hard work that goes into M&A, long before a deal is signed.
Try to keep some of these factors in mind the next time you hear about a merger or acquisition in the news. You may even be able to guess as to whether the deal will prove to be a success.