What does your acquisition integration plan look like?
The statistics are depressing. One out of 5 mergers create value. 80-90% of acquisitions fail. 50% of acquisitions actually decrease value. So with that, why would you even consider entering into this pothole? Yet, day after day, companies enter into new agreements to acquire something, merge with someone or to be sold and hope for the best.
If you’re the seller and you don’t have much riding on the long term effects, cash the check and run for the hills or head for the beach. If you’re the buyer, well hang onto your hat because it’s going to be a bumpy ride….at best. If you think for some reason you and your company can do it better than anyone else, you’re probably fooling yourself. And if you’ve never done it before, you’re definitely fooling yourself.
In past posts, we’ve examined the main areas where M & A deals fail:
- Overall Strategy
- Strategic Fit
- Deal Structure
So looking on the bright side, what CAN you do to improve your odds (and that’s what they are), of actually achieving the value you seek?
If it hasn’t been part of your overall growth strategy, you need to ask yourself, ‘Why are we doing this?’ Challenge your leadership team to continually examine the ‘Why’ part of it and have the discipline to walk away at any time right up until the closing of the transaction. It’s extremely difficult to do that, but when you see red flags, heed them. Don’t fall in love with the deal as so many times happens.
Culture is one of the biggest reasons acquisitions fail to meet their goals. The two companies coming together do not pay attention to culture – it’s one of those soft touchy things no one wants to deal with – or they think HR owns culture, which when you really think about it, of course they don’t.
The best way to improve your “odds” of a more successful result is to tie it all together – have a continuous process and oversight from the strategy through the integration. We’ve just launched services that do just that. (I know, this is a shameful plug, but hey, it’s our website so we can do that.) For the most part, the investment bankers, the internal deal staff, etc., are all focused on closing the deal – then they’re done. But that’s when the value creation begins. Having an outside resource (that’s us) provide independent oversight and capacity, can bring continuity to what is typically a very disjointed process and greatly increase the potential for value creation.