a16z Podcast | M&A and Innovation, Inside Out

TL;DR

Stephanie Cohen, Chief Strategy Officer at Goldman Sachs, discusses the importance of strategic thinking and the role of M&A in driving innovation in large companies.

Transcript

hi everyone welcome to the a six in Z podcast today's episode is at Stephenie Cohen chief strategy officer at Goldman Sachs in conversation with a 6nc general partner Martine casado the discussion which originally took place at our annual a6 and Z summit in November 2018 covers everything from the ins and outs of M&A to the always hot topic of buil... Read More

Key Insights

• ❓ Strategy and M&A should be aligned within a company, with the understanding that both organic and inorganic growth can be valuable.
• 😤 Successful M&A requires involvement from both deal-makers and the integration team, as well as a focus on strategic reasons for the acquisition.
• ❓ Valuing companies in M&A and organic growth requires considering growth assumptions rather than fixating on a specific valuation.
• ✋ Higher valuations can create a greater commitment to success in M&A, but they should not be the sole driver of decision-making.

Questions & Answers

Q: How does Goldman Sachs approach the tension between M&A and internal innovation?

Goldman Sachs aims to have strategy and M&A in the same place to align goals. The company believes in first determining the strategy and then deciding whether to pursue organic or inorganic growth. Both options are considered together, with opportunities analyzed for their availability and potential success.

Q: Is M&A always a failure, as commonly believed?

M&A can be successful when approached strategically. Companies with a clear strategy that involves both deal-making and integration of the acquired business are more likely to succeed. Failure can be avoided by involving the right people from the beginning and leaving acquired teams to continue innovating.

Q: How do you value companies in M&A, particularly in early-stage or strategic areas?

Valuing companies in such areas is challenging, both in M&A and organic growth. Traditional valuation techniques, like DCF analysis, can guide decision-making but may not provide a single answer. It is important to consider the assumptions needed for success and have a rational discussion around growth prospects rather than fixating on a specific valuation.

Q: Is a higher valuation beneficial in M&A deals?

Higher valuations can provide a greater commitment to a deal, as the cost of failure is higher. This often leads to more focus and dedication to making the acquisition a success. However, it is not a reason to pay more and should not be the sole factor driving decision-making.

Summary & Key Takeaways

• Stephanie Cohen talks about her background in M&A and her current role as Chief Strategy Officer at Goldman Sachs.

• She emphasizes the importance of aligning strategy and M&A, and how both inorganic and organic growth can be valuable for a company.

• Cohen dispels the belief that M&A always fails, highlighting factors such as consensus and the integration of teams as key to success.