In a recent workshop I started my chat with a statement: “Buying another company is just like buying a house, as long as you remember you’re buying the family inside it as well!
I wanted to sear that image in the minds of my audience. Acquisitions fail mainly for one reason, the mishandling of post-acquisition integration (Moeller, Scott. “The Good, the Bad, and the Ugly: A Guide to M&As in Distressed Times”. Cass Business School – 12,339 deals 1984 to 2008 – Success determined by? Post-acquisition integration).
Whether you are buying a small company or a larger enterprise as an acquirer at legal completion of the deal, you will be onboarding between say 20 to 20,000 people.
Just consider that fact for the moment. Park the strategic reasons for the deal. Park the price you are paying. Forget about the deal structure. Just consider the humanity piece for a second. Think of the effort invested in recruiting the best talent for your business at any level. Think about the interviews, the tests, the assessments for each new joiner. In an acquisition you are doing that on one day times 20, times 100, times 20,000. At completion, an army of new people is joining you.
Is it any wonder acquirer’s fumble the ball in the post-acquisition integration phase? The investment bankers, the lawyers, the internal corporate finance team may have helped close a great deal strategically and financially, but that’s not how history will remember the deal. Has the acquirer successfully integrated the team being acquired, motivated them to build a stronger business, supported them to execute a more audacious strategic plan, and enhanced the careers of talented acquired employees? That’s how stakeholders will judge your deals. Of course, you want to nail the strategic reason for the deal, you want to pay a fair price but you need to demonstrate you can acquire people, treat them with respect and give them reasons to invest their careers in you.
To achieve these post-acquisition goals requires a different approach from that taken by most acquirers. Here is some further research to make the point – PWC conducted a survey in 2013 of 106 executives at Fortune 1000 companies concerning the Strategic, Financial and Operational success of their M&A activity. Just over 60% claimed strategic success, under 50% claimed financial success and an eye-watering 33% (barely) claimed operational success.
A Different Way
Acquirers need to rethink their approach if they are to beat the odds. Our Acquisition Process Model demands a different way of thinking. It places post-acquisition integration into the belly of the process. It asks acquirers to prioritize targets not just on the basis of strategic fit but also cultural fit. It challenges acquirers to invest in more homework on the target long before early meetings. Our process rehearses answers to questions normally pushed much deeper into the process e.g. “How will you run my business once you’ve acquired it? How will you integrate my sales team? How will my product family fit into your product/service roadmap?” If your answer is, well we really haven’t considered that at this stage. Fail.
Throughout our process, we create opportunities to explore post-acquisition fit and integration plans, because it influences everything – price, deal structure, meetings tactics, due diligence scope, warranties and the ultimate success of the deal.
Our latest testimonial endorses our approach:
“Over the past two years, Ian has been an integral member of Web Industries’ Corporate Development group along with our acquisition team. During this time, Ian utilized his excellent background and skills to assist us in developing a fully integrated and repeatable acquisition process, which utilizes his Acquisition Process Model. He fully integrated this process into Web with skill and empathy, ensuring alignment with our existing playbooks. Ian has been an important part of Web’s acquisition team, assisting in the identification of key strategic acquisition prospects and the subsequent acquisition of Omega Systèmes in France. Ian’s clear direction, insightful commercial judgment, and well-honed financial and technical skills aided in the completion of this deal. Additionally, his organizational skills along with his keen insights were instrumental in our post-acquisition integration process, ensuring success in our post Integration Management Office.” Kevin Young Vice President Corporate Development at Web Industries.
Reach out at Ian@TPPBoston to discuss your acquisition approach.