Acquisitions can be a successful way to expand a company’s market share, diversify product offerings, access new technologies or talent, or eliminate competition. Nevertheless, research has shown that the vast majority fail to achieve their forecasted financial goals. It’s thought that one of the main reasons for this is the failure of the acquiring company to create and implement a comprehensive acquisition integration process.
In this article, we’ll delve into the five key elements that underpin a successful business acquisition integration. Whether you’re an entrepreneur looking to scale your venture or a seasoned executive seeking to navigate the intricate world of mergers and acquisitions, understanding these crucial elements will equip you with the knowledge and insights to embark on a successful integration journey.
Establish your direction
Keeping in front of mind why the deal has been made will help ensure the primary sources of value around the acquisition are prioritised. For example, if the goal is to gain access to a new market, it will be crucial to concentrate on integrating the acquired company’s sales and marketing teams with the existing ones as quickly and effectively as possible to maximise market penetration. If the goal is to acquire key technology or intellectual property, focusing on integrating the research and development teams early on will help the transfer of knowledge and expertise. By establishing a clear direction based on the strategic motivations behind the acquisition and aligning integration efforts accordingly, companies can navigate the complex waters of mergers and acquisitions with clarity and purpose.
Start planning early
When it comes to integration planning, there’s no such thing as starting too soon. It’s a process, not an event – it may continue for months or years after a contract is signed, and begin before the deal is announced. It’s therefore a good idea to make as many major decisions as you can during the initial stages, such as defining an overarching strategy and identifying key integration leaders. You might consider appointing a group of people to oversee the process who collectively have experience in a variety of areas, for example HR, IT, operations, legal, taxes, and finances to help cover all bases and ensure the transition runs smoothly. An early start also allows for in-depth due diligence, thorough analysis of integration opportunities and challenges, and the development of a comprehensive integration roadmap.
Prioritise cultural alignment
Naturally, bringing together two separate teams – each with their individual processes, skillsets and knowledge – has the potential to cause tension. It’s a little bit like inviting a new family to live in your house alongside your own and expecting everyone to get along! That’s why prioritising cultural integration between the two organisations is paramount, as your people are the ones who need to be on board with your mission and guide your business through this potentially treacherous time. After all, according to research, 95% of executivesdescribe cultural fit as a key factor to successful M&As, yet 25% cite a lack of cultural cohesion and alignment as the primary reason integration efforts fail. To cite a real-life example, when Amazon acquired Whole Foods in 2017, a clash of cultures was almost immediately apparent. Where Amazon valued efficiency, performance and rules, Whole Foods valued self-management and autonomy – differences which almost sabotaged the union.
Communicate consistently
An acquisition will create not only a whole new company, but also a whole new vision, strategy and ambitions. This is something that will need to be consistently and comprehensively communicated with stakeholders. While not every detail can be shared, disseminating as much information as possible will help to foster trust, discourage the development of rumours or speculation, and help those involved to accommodate the change more comfortably and confidently. For example, you might consider creating bulletins for employees that address questions or concerns, or hosting regular town hall meetings or Q&A sessions to provide updates and address any uncertainties. In each of these, it will be important to emphasise the strategic rationale behind the acquisition, the benefits it brings, and how any changes align with the long-term vision of the company.
Resolve power and people issues swiftly
Ultimately, the organisation post-acquisition should be designed around the long-term vision and ambitions for the combined company, and you’ll want people on board from both who are eager and excited to contribute to it. It’s inevitable that as a result of the new merger, some positions will be lost, and some will be created. It’s important to set ambitious targets for announcing both new appointments and redundancies, and stick to them. If not, it’s a real risk that some of your most talented employees will leave due to not knowing if their job is safe. Leaving people guessing about who will fill new roles and who will be let go will only lead to uncertainty and stress. For example, when Bank of America acquired Merril Lynch in in 2008, the two companies took such a long time to integrate their assets and make key executive announcements that many employees, aggravated by the indecision, gave up and left.
In conclusion, successful business acquisition is a complex and detailed process that requires patience, diplomacy, compassion, and compromise. To have the best chance of success, companies must embark on this adventure with strategic direction firmly in mind, aligning their efforts with their goals and motivations. Early planning allows for a thorough exploration of integration opportunities and challenges, paving the way for a seamless transition. Cultural alignment becomes the glue that holds the merging teams together, while open and consistent communication serves as a beacon of trust, guiding stakeholders and employees through the waves of change.
GRG Executive Search can provide the transformation talent you require to guide your business through times of uncertainty. For a confidential discussion about how we can help, contact our Associate Director and specialist in transformation talent Hayley Smith on hayleysmith@grgexecsearch.com. To find out more about out upcoming events, contact us on info@grgexecsearch.com.