Instead of a traditional sales push for a newly acquired service, Hexion partners with customers to co-develop the offering. This approach gives customers 'skin in the game,' ensures the product meets their needs, and accelerates adoption in a market unfamiliar with the new 'chemicals as a service' model.
Sourcing proprietary deals, especially with family-owned businesses, is an exercise in long-term cultivation and relationship building. It requires regular engagement, demonstrating how the buyer will preserve the target's legacy, and patiently waiting for the right moment, with the goal of being the first call when the seller is ready.
Chandra Dev Mehta explains how Hexion uses M&A to pivot from a traditional chemical company into a 'technology focused chemicals as a service' business. This strategic use of acquisitions helps them escape the challenges of the commodity sector by adding a recurring service and technology layer to their offerings.
Moving from investment banking to an in-house corporate development role shifts the focus from advising on a transaction to owning its outcome. The success of a deal is ultimately measured by the successful integration and realization of synergies, rendering the initial price irrelevant if value isn't created post-close.
Effective investment bankers differentiate themselves by presenting a few highly relevant, well-researched acquisition ideas rather than a broad list of targets. The best pitches demonstrate a deep understanding of the client's strategy and provide a unique 'angle' on why a specific target is actionable.
Hexion's decision to acquire technology capabilities rather than building them internally was driven by two factors: speed-to-market and de-risking commercialization. Buying a business with an existing or near-commercial product provides a significant head start and avoids the uncertainty of a long, internal development cycle.
M&A diligence occurs in two phases. The first phase, post-IOI, validates the strategic thesis and value drivers. The second, confirmatory phase post-LOI, stress-tests the integration plan's feasibility. This requires appointing an integration leader early to ensure the plan is realistic and owned before the deal is final.
Divesting a small, non-core business is often harder than a large one. The buyer is highly focused and knows the asset intimately, while the seller's organization sees it as a distraction. This information and focus asymmetry puts the seller at a disadvantage, often forcing them to concede value to manage risk and close the deal.
Unlike a full acquisition, negotiating a joint venture requires defining the exit strategy ('divorce') while forming the partnership ('marriage'). Key points of contention include governance rights, decision-making processes, future funding commitments, and veto powers, all of which must be structured upfront to ensure long-term alignment and stability.