Testimonials and farewell dinners are nice. But for a really strong affirmation of an executive's value to a company, it's hard to top a good lawsuit.
That was how IBM Corp. responded in May when vice president of corporate development David Johnson said he was leaving the company to become head of mergers and acquisitions at Dell Inc. Citing a noncompete agreement he signed in 2005, IBM sued Johnson to block the move. A 28-year IBM veteran, Johnson spent the past eight years overseeing nearly 100 acquisitions and some major divestitures and, just as importantly, building one of the world's top corporate development organizations. Dell, meanwhile, has been an M&A laggard in a fast-changing industry. With $9 billion in cash to put to work, it hired Johnson after a well-publicized search, and his experience as an organization builder was probably a big part of the attraction.
As a top talent in an active sector, Johnson is at one end of the spectrum in the current corporate development job market. Though it could be months before the lawsuit is resolved, odds are that within a year he'll be shaping and executing M&A strategy at Dell. Where many other corp dev professionals will be by then, however, is harder to say. The former dealmaker at a previously acquisitive midsize food company is a case in point. Until the company can borrow again, it can't buy, and therefore it doesn't need to keep a highly paid transactions specialist on hand. The dealmaker was laid off in January in a round of staff cuts, one more corporate development casualty of the worst recession since the 1930s.
Also see "Thinking bigger at Brady"
Like the M&A market itself, corporate development jobs have always been cyclical. But the specialty has never experienced a down cycle like this one, and the extreme conditions are producing a variety of responses -- and, for corp dev professionals, a variety of experiences -- as companies revisit the tough questions that have always come with the territory. Is corporate development talent expensive overhead, disposable in a down market, or is it a vital resource? How much do you need in-house, and how much can you get outside when the need arises? How should those in-house people be deployed?
Thus, even as companies in hard-hit industries such as autos, retail or financial services are laying off corporate dealmakers en masse, some in hot sectors like information technology and pharma are hiring and upgrading their teams. Still others are eliminating just a few positions or keeping their deal teams busy codifying past lessons, working with troubled suppliers or taking on other tasks as they get ready for the next dealmaking wave.
Overall it's clear that corp dev jobs are down significantly. Since the layoffs usually come in the context of broader cuts, however, it's hard to say how much. "We know that the ranks have thinned quite a bit," says Randy Gulian, founder and president of executive recruiter Allegis/InSearch Worldwide Corp. in Stamford, Conn., and a specialist in filling M&A and strategy positions. "But the layoffs are often under the radar."
We do know that in corporations with large deal teams, it's often the No. 2, 3 and 4 dealmakers taken out, Gulian says. "The bigger companies, 90% of the time, will keep the senior M&A guy. These are often public companies that are expected to grow. If you fire everyone who's in acquisitions, it doesn't bode well for growth."
Numbers are easier to come by on the hiring side. In 2008, Gulian -- who specializes in technology, financial services and media and information services -- says he did 17 searches for 'corp dev executives, most for senior-level positions inside large, multinational corporations. Of those 17 searches, 15 were for pure M&A roles and two were for hybrid strategic planning/corp dev roles. In the first five months of 2009, by contrast, Gulian conducted one pure corp dev search and three for combination strategy/corp dev positions. He expects the hiring market to remain sluggish through the rest of the year, with a possible uptick in hiring in early 2010, as corporate budgets are enacted.
Of course, more unemployed corporate dealmakers competing for fewer job openings isn't the whole story. Also in the picture are the thousands of investment bankers laid off since January 2008. Some corp dev chiefs are wary about hiring former investment bankers, worrying about cultural fit and whether their new hires will go back to better-paid jobs in banking when the market improves. But many former bankers have made the switch, and many more would like to.
The result is an even bigger pool of candidates, many with impressive credentials. "The quality of the talent is much higher than I've seen in the past from both people who don't have a job and from people whose jobs have gotten dramatically less challenging," says Michael Frankel, senior vice president of business development and M&A for the workflow solutions and business information provider LexisNexis.
LexisNexis, with a financially sound parent, Reed Elsevier Inc., and a business model powered by long-term subscriptions, is weathering the economic downturn better than most. Dealflow has slowed, but more because of the ongoing integration of its $4.1 billion acquisition of ChoicePoint Inc. in February 2008 than the economic climate. In fact, Frankel is hiring. He recently hired an analyst and is in the market for a senior business development executive. He says he's receiving more resumés than he would in a normal market, some from executives who are too senior for the position he's looking to fill.
But if reviewing resumés has gotten more interesting, sending yours out in this market takes an extra measure of optimism. That comes through in the stories of four folks who have done so in recent months, with different results. Two were most recently working for corporate employers, and two were bankers.
Start with Michael Adair, who first appeared in these pages in July 2008 after leaving Google Inc. -- where he headed North American sales finance for 4-1/2 years -- to join vertical ad network startup Glam Media Inc. as vice president of corporate development. In March, after 20 months in the job, he left. "The world when I joined and when I left was very different," he says. "Cash, while always important, became critical to the company. We knew we weren't going to do any deals in the short term, so we decided to part ways."
Adair, who remains an adviser to Glam, has spent the months since seeking a permanent position. As a former investment banker at Merrill Lynch & Co. and Lehman Brothers Inc., in addition to his time at Google, he has a deep network to tap.
"People want to talk to me. That's not an issue," says Adair, who estimates he's had conversations with more than 100 corporate executives and venture capitalists. "A lot of people have positions but they want to wait until Q4 to hire. I've heard that numerous times. I've had some opportunities for full-time jobs, but they didn't make sense for where I want to go."
Where he'd like to go is a large media corporation forming or expanding its digital strategy. And there's no shortage of those. Just about every big traditional media company is trying to find its place in new media, and Adair has spoken to many of them.
"I've started giving some advice on the side," he says. "Of course, I'm not getting paid for it, but it's building the relationship."
A dealmaker's ability to build relationships and work his or her network can provide the edge needed in a tough job market. For one former banker laid off late last year after a decade focused on media, that meant having "coffee, breakfast, lunch, dinner and drinks" with everyone the dealmaker knew.
"There were tons of [investment banking] boutiques opening, and they were hiring. And all the calls I got from recruiters were around finance opportunities. But I felt I had gained some deal experience that could be very relevant from a corporate finance perspective and from an overall industry and contact perspective," says the banker, who wished to remain anonymous. "I was fortunate that I'd met so many people over the years because I had a number of opportunities pretty quickly."
This spring, the banker landed a corporate development job with a new media technology company.
That this dealmaker and Adair have deep experience in an industry undergoing transformation has been a big plus. It's gotten them meetings with senior-level executives at a time when most industry players are plotting or adjusting their growth strategies.
Karin McKittrick, another former financial services executive, also believes her skills would transfer well to a corporate job. In March she was laid off from Fifth Street Capital LLC, a specialty finance company that co-invests with private equity firms, where she was a vice president of business development. "I have had interviews for business development jobs in the media, advertising and entertainment space, and if the right fit came up, I would absolutely be open," she says.
McKittrick has been attending conferences and has maintained her position on the board of the Connecticut chapter of the Association for Corporate Growth, helping plan events and attract sponsors. "It gives me another reason to stay in front of my network."
She's submitted her resumé for jobs posted on efinancialcareers.com and theladders.com but is "convinced they go into a black hole."
Still, McKittrick remains upbeat. "You have to," she says. "It's really all about who you know, and it's about being around when the right opportunity becomes available."
For Drew Ries, a longtime corporate dealmaker, the right opportunity turned out to be co-founding a startup. Ries left the Bala Cynwyd, Pa., trading firm near Philadelphia, Susquehanna International Group LLP, in November 2008, after about 18 months analyzing new business ventures, an effort that, as the market shifted, didn't align with SIG's strategy.
Ries, who previously headed corporate development for the payment processing firm Wright Express Corp. and worked in M&A and principal investment at Enron Corp., spent months meeting with executives but had few conversations about viable job offers. "What I heard was, 'We like your background. When the market improves and we're looking to add talent, we should continue this discussion.' "
So when the opportunity to go into business with friend Nick Araco in his hometown of Philly presented itself, Ries jumped and is now co-founder and CFO of AchieveNext LLC, an online professional and social networking group for finance professionals. It was an unexpected landing for Ries, who had always viewed his career as following one of two paths. "I could become a permanent corporate development person, looking for the next big organization to take on more responsibility and bigger deals. Or I could move into a business role or corporate finance role in the organization."
As it happens, Ries is excited about the opportunity to apply his skills in a smaller organization and put them to use in a broader capacity.
Clearly, it's a time to be flexible -- even for dealmakers whose jobs are safe. With dealflow stalled, M&A executives are putting their skills to work in other capacities.
"I know three top M&A executives -- all former investment bankers -- who have been put in charge of relationship management in the past five months," says Allegis/InSearch's Gulian. "The corporations saw that their M&A skills were really client facing and that those executives would know how to sell at a higher level." Not that it's always easy to get redeployed. Gulian says some business unit managers are unwilling to absorb the big salaries of senior dealmakers and that it's easier for less senior M&A team members, whose skills might be more fungible, to move into a line job.
LexisNexis' Frankel, meanwhile, has some members of his business development team documenting best practices.
"We're doing a lot of the stuff that during the heady days, when we're moving quickly, we weren't able to do. We're getting our integration best practices out of our heads and onto paper in detailed reports and formats. And we're training people on those practices to help prepare ourselves for the inevitable upswing."
A similar effort is part of a rethink of corporate development at Brady Corp., a Milwaukee maker of safety and identification systems with 2008 sales of $1.5 billion. Director of corporate business development Brien Christopherson has led a team in a five-month review of 28 deals Brady did in the past six years. "We did a very deep analysis on a lot of data and surfaced three or four things we can institutionalize into our process going forward." (For more on Brady's corp dev restructuring, see box.)
So does all this ferment tell us anything about corporate development as a profession? In a way, yes. Unlike some other high-level corporate jobs, corp dev roles have always been highly situational, shaped by a company's industry, size, culture and strategy, as well as by economic conditions. What we see now is an amplification of that effect, with the fortunes and needs of companies varying more sharply than ever in the harsh climate.
Through it all, some trends may be taking shape. A preference for smaller corporate-level deal teams, already in evidence at some big companies before the recession, could remain widespread even when M&A returns. Depending on the company, that can require more deal knowledge at the business level and also greater reliance on outside advisers.
As for the top corp dev job, recruiter Gulian sees what could be another significant development: a move to combine the corp dev and chief strategist positions. That's a departure from the most common -- though far from universal -- setup, which has the corp dev chief concentrating on executing transactions and reporting to the CFO. "It is a trend that bears watching to see whether it is a reaction to the difficult business environment or a longer-term overall shift in how companies think about this role," Gulian says.
The easiest prediction is that companies that have refrained from transactions in this difficult economy will eventually restart their M&A engines. And with the stakes in M&A being as high as they are, they will need people in-house who know what they're doing.
It's a truism borne out not just by history, but also by the legal
battle over Dell's Johnson. When a company faces change -- and what
company doesn't, sooner or later? -- the specialized skills of an
experienced dealmaker are sure to be in demand, and even worth a good
Also see "Thinking bigger at Brady"