I recently gave some counsel via email to a CEO friend of mine who is hiring a Director of Corporate Development for his fast growth tech company. The below are my 4 pull-no-punch pieces of advice:

First, don’t hire anyone who hasn’t specifically done CORPORATE DEVELOPMENT (preferably in public companies). Doing deals as an investment banker, for example, is not a good proxy. There are a lot of “deal mercenaries” out there, but they are accustomed to doing a transaction and moving on to the next one. You’ll want someone who knows what it’s like to have to live with what they’ve bought and, further, knows how to integrate and extract value from a corporate acquisition…

Second, don’t hire anyone who hasn’t also already RUN a business. This is the corollary to point #1. Again, some of the most impressive deal guys out there are only that — deal guys. They’ve never run anything. To be effective in the integration and value realization stage of acquisitions, your hire must also have OPERATING EXPERIENCE.

Third, don’t hire anyone who hasn’t previously assembled and run a bona fide CORPORATE ACQUISITION PROGRAM. This is a very specific skill set. It means working with the BOD, establishing criteria/valuation parameters, organizing internal/external deal teams and resources, standardizing screening, acquisition procedures, etc. all coordinated to minimize miscommunication and mistakes. To be successful, an acquisition program must be comprehensive, highly uniform, and well organized. Time and capital are too precious for ad hoc acquisitions orchestrated by beginners. The stakes are simply too high…

Lastly, and very importantly, give your new hire authority. Don’t have your CFO or your “semi” VP of Corp Dev periodically step in and run acquisitions. This will create confusion for all parties involved, and very important matters will be neglected when they have to go back to their “real” jobs. Of course, there will be overlap and interface with these individuals during acquisitions…there must be…but a single, dedicated leadership figure is absolutely necessary for the corporate development role. Dilute responsibility and authority for your acquisition program at your peril!

Good advice isn’t always easy to follow. Let’s see if my CEO friend follows my recommendations…

Posted by: Mory Watkins

One of the things I particularly enjoy about corporate development is meeting others who work in and around the field of buying companies. [BTW, feel free to contact me if you’d care to introduce yourself.] The people in corporate development are all interesting, to me at least, and seem very different from each other.

This actually makes a lot of sense because companies rarely approach the corporate development function the same way; it should follow that many different approaches mean many different types of people. The profession just naturally accommodates a great diversity of backgrounds and perspectives.

So where do the people come from?  The only research I’ve ever seen on this matter mirrors my theory that corporate development essentially fills its ranks with its service providers. Individuals come to the corporate development profession primarily via law, consulting, and investment banking backgrounds. And, certainly, many join prior clients, having already established themselves as a trusted counsel, consultant, or financial adviser on a previous deal.

And the balance? The remainder seems to come from internal promotion, usually via a lateral move from a related corporate function such as strategic planning or business development. But don’t these types of people lack M&A and deal skills? Yes, but I would guess that companies that approach corporate development via an internal hire do so with the expectation that they can be supplemented with someone, either internal or external, who has deal experience. The internal hire approach provides value via other means, such as deep knowledge of the organization and the relevant vertical market, integration expertise, and sometimes even industry stature.

The most common path to corporate development, again from my own observation, seems to be via investment banking. Investment bankers leave the cyclicality, long hours, and uncertainty of investment banking for the relative stability of corporate development. Investment bankers arguably boast some of the strongest technical transaction skills, and most have industry contacts and knowledge, but, in my opinion, they also lack requisite integration and operating skills. Investment bankers tend to be highly transaction oriented and many just aren’t accustomed to the longer-term people and strategic issues that arise in corporate development (no offense intended to any present or former i-bankers). If you’ve never run anything, how can you fully appreciate all that happens post-deal?

Oh well. To each his own. The people that I have seen thrive in corporate development are the ones who have wide perspective and varied experience — deal skills, strategic insight, and operating ability — and they come from all over.

Posted by: Mory Watkins

Today, I’d like to begin a discussion about Corporate Development and Corporate Development careers.

What exactly is Corporate Development and where does it fit in an organization?

There actually isn’t much consensus about what “Corporate Development” is. Wikipedia’s (current) definition, as good as any, says that Corporate Development encompasses “a wide range of strategies to meet specific organizational objectives.” The entry goes on to say that some of these objectives are internal, organic things — like growing management teams, offering new products, and expanding into new markets — and some of the objectives are outward-focused, like joint ventures and acquisitions.

I’ll admit to thinking of Corporate Development as being almost exclusively a business strategy focused on external, inorganic (read: M&A) growth efforts. To me, Corporate Development is about 95% strategic M&A. Period. I’m not entirely alone here; most companies and executive recruiters think this too. Check out Corp Dev executives and their related responsibilities on LinkedIn. Or, better yet, check out the position descriptions for Corp Dev jobs on any job search engine. You’ll see that the majority of the responsibilities for these positions is related to evaluating strategic deals and running the deal processes.

Still, there’s quite a bit of confusion and no two businesses or situations are exactly alike, of course. So, what isn’t Corporate Development?

To me, one of the closest executive suite relatives to Corporate Development is Strategic Planning. As the name suggests, Strategic Planning has both a strategic element (industry trends, competitive analyses, new business initiatives, etc.) and a planning element (vision/mission statements, budgets, 5 year plans, etc.) Yes, there’s overlap between Corporate Development and Strategic Planning…you can’t very well grow a company without thinking long term and planning strategically. Corporate Development, though, tends to be more focused on the nuts and bolts of doing the acquisitions while Strategic Planning largely seems to provide the reasons for doing the acquisitions.

Another term people often confused with Corporate Development is “Business Development”. But this one couldn’t be clearer, in my opinion. To me, Business Development is really just another name for “sales”, albeit on a more strategic level than everyday sales. Many businesses have high dollar, long sales cycle characteristics that necessitate a kind of strategic sales process that includes deep industry or sector knowledge, high level contacts, and a premeditated, macro strategy for generating revenue. A Business Development executive leads this process. Again, there is some obvious overlap with Corporate Development, and some companies even give Business Development jurisdiction over acquisitions, but I consider this to be a wholly separate discipline. Corporate Development is really more about strategic acquisitions, while Business Development is about making the (strategic) revenue sale.

Next time, more on Corporate Development and Corporate Development career paths.

Posted by: Mory Watkins