Why you should consider building an M&A function in your business.
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As recent events on the global trade front have reinforced for all of us, 2025 is moving fast and bringing high levels of change and uncertainty. To adapt, companies need all the tools at their disposal—especially power tools like mergers and acquisitions. This is particularly true for companies in the global and volatile direct selling industry. But like any power tool, merger and acquisition (M&A) strategies need to be wielded carefully.
Isn’t M&A Inherently Risky?
For years, I’ve heard people throw out the old refrain that most M&As fail. That view has its roots in a study from 2004 that posited that many deals did not create meaningful shareholder value. (That same report nonetheless conceded that M&A was a necessity for most companies’ long-term growth). However, a more recent Harvard Business Review article put those old views to bed, showing that close to 70 percent of recent mergers succeeded.
What changed to turn the risk around? For one, companies have simply gotten better at it with more sophisticated processes and more experienced dealmakers available. Another factor is that the dealmaking environment has improved, with the evolution of transaction structures, tax planning, executive compensation instruments and the relatively free flow of capital.
There is no reason why these positive trends shouldn’t also apply to the direct selling industry—and they clearly do. Take for example bolt-on transactions. These are popular in the direct selling industry where many companies seek a continual pipeline of new products to refresh and motivate their fields. Acquiring new brands and product lines through M&A is a tested solution for this need. But to build a pipeline of potential opportunities and evaluate them regularly requires good processes.
Creating an M&A Function
To be clear, building a function doesn’t mean adding a new department or even hiring new people. It does involve being intentional about assigning specific responsibilities within the management team and setting up accountability for those responsibilities. This involves at least a few key roles.
First is the corporate development role. This is the management team member who is the nexus, the conductor, the first point of analysis and the project manager for all things M&A. They need to always know what the CEO and the Board of Directors are looking for. They also need to know what the other members of the management team are seeing in the field that could affect the company’s strategy. They are the point of intake for opportunities and conduct basic analysis to confirm a potential transaction is in scope before allocating more resources. When a transaction kicks off, they provide the process leadership to closing.
Second is the legal role. Before a company lands on a deal, it is going to review many (perhaps dozens) of opportunities. Each of these exploratory starts will involve simple but important contractual and regulatory compliance steps, such as reviews of confidentiality agreements; drafting of offer letters; analyzing regulatory barriers; negotiating term sheets and exclusivity agreements, etc. These preliminary steps are not challenging, but they require someone with a trained eye and available bandwidth because simple mistakes early on can lead to wasted effort and deal friction later in the process.
Third is the diligence team. This team is activated when a decision is made to negotiate and close a particular transaction. They are the representatives from tax, accounting, benefits, product development and other departments who will bring their knowledge and expertise to the due diligence effort required in vetting a serious opportunity.
Of course, these individuals have full-time jobs in their departments, but for this purpose, they need to be in a position to pivot and devote significant time to a transaction when that day comes. They may not get the sleep they are used to for a few weeks! They should also receive training regarding what is expected of them, and there will be some growing pains as they gain experience analyzing opportunities and identifying relevant issues.
Fourth are the external advisors: consultants, law firms and accounting firms. You typically don’t need to pull these in until you are confident you’ll be moving ahead. But when you get to that point, the private equity model of engaging advisors to turn over every leaf is just smart business. Dealmaking at this stage can be costly, but trying to do a deal on the cheap means turning a blind eye to potential risks, and in M&A many of these risks are material in a way that could contaminate the rest of your enterprise if not identified and quarantined.
Don’t Forget the Board
Another best practice for M&A strategy is to not get ahead of your governing body, whether that is a Board of Directors, Board of Managers or Founders. The worst thing is to have spent time and resources on a transaction only to later find that the Board’s support isn’t there—or is there but for a different set of terms. Get your Board involved early and provide regular updates.
Good Hunting
If you implement and follow these basic processes, you will see more opportunities and be well positioned to execute on them. We’ve seen companies build significant value through M&A, sometimes all in one transaction like a timely exit or blockbuster merger, but more often through careful and well thought out bite-sized acquisitions.
There is a lot of upside to be captured here, and even if your organization rarely pulls the trigger on a deal, companies that are regularly engaged in evaluating and looking at opportunities tend to learn valuable perspectives about the broader industry and best practices to apply to their own organization. As a result, creating an M&A function and being an active participant in the market brings value in multiple ways.
Troy Keller is a partner at the national law firm, Dorsey & Whitney. Over the years, Troy and his firm have represented some of the direct selling industry’s largest companies in their most important transactions. Troy personally represents the Utah Direct Selling Coalition, an association of Utah’s leading companies in the industry. Before Dorsey, Troy was Vice President of Corporate Law and Global Government Relations at Huntsman Corporation.
From the May/June 2025 issue of Direct Selling News magazine.
