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| Mergers and Acquisitions Security |
By Edward Halibozek and Gerald Kovacich
272 pages; $39.95
Elsevier |
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In this excerpt of Chapter 3 from Mergers and Acquisitions Security, authors
Edward Halibozek and Gerald Kovacich discuss the responsibilities of the security department during a merger or acquisition.
As alluded to earlier, the importance of security in support of a merger or
acquisition can't be overemphasized. All mergers and acquisitions are
faced with security issues and concerns. To properly handle them, security
managers need to be involved. The extent of security involvement varies
depending on the complexity and size of the total effort. Moreover, security
issues and concerns vary according to the nature of the business, type
of industry, and the maturity of the security programs. For example, security
issues common to the banking industry differ from security issues
common to the transportation industry.
Security and the security manager play a supporting role. Like many
other supporting organizations, security contributes to the overall success
of the effort. Security is not the most critical component of a merger and
acquisition team. The merger and acquisition team has a mission to:
- Identify potential targets for acquisition
- Assess those target companies
- Execute the merger or acquisition
The most critical function of any merger or acquisition team is to
properly assess the value of a target company. That responsibility lies with
the financial team. That is not to say that security is not an important element in preparing for and executing a merger or acquisition; therefore, it
should not be ignored or relegated to a role of less significance. The paramount concern of the merger and acquisition team is to identify and properly value a target company.
The financial team focuses on determining the current financial condition
of the target company. It also assesses its future earnings capabilities.
With that information, a value is placed on the target company. This
process is much like the actions of any serious investor when looking for
an investment opportunity in any company. Investors seek the optimum
deal. A deal that adds value to the acquiring company thus benefits its
owners. When one company acquires (purchases) another company, that
transaction is an investment. The role of the security manager is to do what
is necessary to support the merger or acquisition team in its effort to
accomplish this mission.
In any event, security plays an important role on the merger and
acquisition team. The security team has a responsibility to mitigate risks
and protect the interest of the company, its owners and shareholders. In
support of this obligation, security, as a member of the merger or acquisition
team, helps the team make informed decisions and execute a successful
transaction.
It is not always apparent to the merger or acquisition team leadership
that security needs to be an active member. Nor is it always apparent
in the early stages of the effort that the team will encounter situations
where expert security support is essential to properly protect the effort
and/or its related assets. This is particularly true with new or inexperienced
teams.
Team leaders and team members with little to no experience in
mergers and acquisitions may not recognize the importance of ensuring
that security is an intricate part of the process. If this is the case, it is
incumbent on the security manager to work with team leadership and
help them understand the role security should play. Doing this early in
the effort may help avert security problems from developing later on.
Essentially, it may require the security manager to "sell" security to the
team. It is important to sell security to team leadership based on real
issues and the value security brings to the effort. Don't oversell with
exaggerated claims of what security can or should accomplish. Be realistic.
The credibility of the security manager and organization is at
stake.
Selling security may be as simple as meeting with the team leadership,
or all its members, and providing advice and counsel on relevant
security issues and concerns along with creating an understanding of
what the security organization can do to support the effort. In some
instances, selling security may not be so easy and may require the development
of a more formal business case characterizing to team leadership
the precise value security brings to the effort. In developing the business
case, the security professional should keep separate the protective role
from the assessment role; thereby ensuring both are communicated and
understood.
Read the rest of Chapter 3, The role of security and the security manager in mergers and acquisitions.
