When One Plus One Equals Three
Four ways to ensure that your acquisition strategy succeeds
Many organizations rightfully believe that growing their company can come about by acquiring other firms. The adage of “One Plus One Equals Three” rings true in many cases. Take Disney’s purchase of Pixar for instance.
However, for every successful merger, there exists a litany of failed experiments; ones that did not deliver on their promise to customers, partners and shareholders. Only through executing a well-thought-out strategy can organizations realize the true potential of growing through acquisitions. It’s no easy feat. Finding the right businesses to purchase can be 10 times harder than selling your own.
So as companies embark on an acquisition initiative, take the time to formulate a game plan that includes the following:
Evaluate Each Prospect For Its Strategic Value
Many owners seeking to purchase other businesses take an “opportunistic” approach by keeping their eyes and ears open to hearing about companies looking to sell. That’s not enough to put them on the list of potential purchases. Businesses should be more strategic in their evaluation of a prospective company by looking to see how acquiring the organization can expand their existing geographic presence, product or service expansion, “wallet share” with existing customers and the like. These businesses are ones that can create far more value to a buyer.
Determine How You Will Retain Customers
A merger almost always brings about some degree of uncertainty for customers who will wonder how the transaction will affect them. They will be concerned about the continued commitment to existing product and services. Train the staff to answer questions and — more important — to ask questions. Engage your client base to better understand their issues in order to address them in quick fashion.
Keep an eye out for how your competition reacts to the transaction as well. Undoubtedly, they’ll seek to take advantage of your customers’ increased anxiety levels. Go on the offensive by proactively communicating the benefits of the acquisition to your clients. Consider empowering your sales people to offer special discounts if customers continue to express concern.
Take Care Of Your People
This is arguably the most important aspect of the transaction, but the most often overlooked. Maintaining your positive corporate culture intact after an acquisition is critical if you are to retain top talent. Failure to do so will have a significant, negative impact on practically every aspect of your business. Plan how to integrate the varying members of the new team. Create incentive plans to keep your best performers. Be sure to review your employee benefit packages to ensure they are attractive for the new batch of teammates you obtained in the process of buying the business.
Prepare For What Happens Next
Walk through the post-closing integration plans carefully to ensure as seamless of a transition for all aspects of your company as possible. This includes things like your IT network, logistics, operations/production, accounting and such. Start planning the processes soon after completing the due diligence; before the deal closes. Figuring it all out after the fact will cost much more in terms of time and money.
Acquiring the right companies can offer exponential growth opportunities to many organizations, but may also bring about a host of problems if businesses fail to strategize on what firms to acquire and how to go about it. There’s too much at stake to do otherwise.
About The Author: Tim Malott is a Partner with Shoreline Partners, and has led numerous sale, merger, acquisition and financing assignments across a wide array of industries. A former CPA and bank president, his career spans public accounting and commercial banking as well as investment banking through which he has gained knowledge and experience in nearly every industry and business sector. Mr. Malott can be reached at tmalott@shoreline.com.
