corporate development (CD) department, responsible for executing the
external growth strategies of a company, significantly impacts a
corporationís growth and future. Yet this corporate staff department is
often one of the smallest, least understood and least benchmarked of all
Development Practices Survey
The first in-depth survey of CD practice was
launched in 1993 while I was vice president of corporate development for
Bausch & Lomb, Inc. We surveyed the Fortune 300 regarding their best
CD practices and subsequently obtained the rights to that survey for
Hypotenuse Enterprises, Inc., when we launched the company in 1996. The
covered subjects range from staffing and budgets to dealing with
consultants and intermediaries, from confidentiality agreements and due
diligence process to policy, reporting structure and even CD
1998 we updated that earlier information by re-surveying the same
companies which had originally responded. The 1993 18-page survey had 54
respondents (18% response rate), and the 1998 update survey has a 46%
response rate. The last five years have seen substantial change in many
areas of CD practice. Nearly three-quarters of the respondents are
actually the heads of CD so that their overview of the functionís
evolution is particularly valuable.
Pressure on Corporate Development
updated survey results show a CD head and department under increased
pressure over the past five years.
average CD department size has decreased by about 20%, yet the average
number of deals completed per year has increased by a third.
measure of CD productivity has also changed. The number of deals reviewed
matters less, while the time required to complete a deal matters more.
departmentís role in due diligence has increased. Five years ago, 67% of
respondents reported CD as the primary coordinator of due diligence. This
has increased in 1998 to 83%. CDíS role as primary overseer in due
diligence has risen from 73% to 87% over the same period.
is also an increase in CDís involvement in post-deal integration, from
51% of respondents to 64%. CDís role in post deal integration is
primarily coordination and oversight, rather than audit and control.
Have the Corporate Development Head and Department Reacted to New
are some notable changes in response to increased pressure. There is less
willingness to cultivate internal candidates and train them for the
future. New CD hires from within the company were 69% in 1993, decreasing
to 38% in 1998. CD dropped nearly 10 points in the perception of it as a
career position and 15 points in its perception as a stepping-stone to
other opportunities. There is a factor of 4x increase in seeing CD only as
a temporary assignment. The use of experienced professionals on temporary
assignments is consistent with emphasis on productivity and results.
In 1998, this figure dropped to 17%.
Apprenticeship as a means to qualify CD personnel as negotiators has
dropped precipitously, from 88% in 1993 to 14% in 1998. The reason is most
likely the emphasis on only hiring-in qualified negotiators, a rise from
0% in 1993 to 71% five years later.
Corporate Development Practices Survey, baseline and update, sells for
addition to spending less time recruiting and developing CD professionals
internally, CD has cut back non-deal-related or peripheral activities. Benchmarking
activity, however, has doubled as CD departments try to learn best
practices employed by other companies.
use of intermediaries to offset lower staffing levels has increased. Use
of investment bankers and intermediaries to submit deal ideas is up from
57% to 91%, to submit specific acquisition candidates from 58% to 83%.
Typical fee agreements are slightly larger, and
fees have become much more negotiable, with some decline in Lehman-based
formulas. Intermediaries are seen as slightly more important to deal flow
than they were. The number of respondents who say that a regular system is in place
for keeping in touch with intermediaries has doubled, but use of a formal
printed intermediary policy is only up slightly.
trend as CD accommodates an increasingly pressured environment is to
institute more controls. The use of a standard confidentiality agreement
format has increased by 20 points. Most elements of such policy
remain unchanged, but there is more linkage to board-approval levels, and
specific board-approval levels have increased slightly. Nearly
twice as many respondents are now looking at ďqualifyingĒ negotiators
before allowing them to negotiate.
rate is 19% per year among CD heads, but there is a slight increase in
their longevity. The titles of heads of CD have increased slightly in
prestige, but their reporting relationships have not significantly
Diane C. Harris, President, Hypotenuse Enterprises, lnc., 1545 East
Avenue, Rochester, NY 14610, a mergers and acquisitions advisory and
consulting firm that specializes in outsourcing to the corporate
development officer. The results discussed in this article have been
updated by the 2000 Best Practices Survey, available from Hypotenuse