‘Success in M&A? It’s all about the people!'

Blog 2 - Mergers & Acquisitions – From failure to success

So how can we create more value value through M&A

In the previous blog I gave my view on the reasons why I believe many acquisitions fail and do not lead to the anticipated results. So what is required to succeed and create value with an acquisition?

An acquisition – The best strategic alternative?

It all starts with a very clear strategy and a highly specific and defined M&A strategy. Why do you want to pursue an acquisition? Many companies pursue acquisitions to realise growth. There are various ways to realise growth, some with much less risk and a lower capital outlay. It is important to explore all the alternatives first. And yes, an acquisition can be a big leap forwards, but at a risk and cost.

A common pitfall is that an acquisition is pursued because of the lack of ability to grow with the existing business. The key question is what is the reason for not being able to realise growth? ‘"Know thyself is the beginning of wisdom", one of my favourite quotes from Socrates.

Once you have decided that an acquisition is the right way to grow and have defined the key requirements that a target company should have, the search for the ideal target company can start. If and when the ideal target company has been found, thorough preparation is of the essence.

Assessing culture in an early phase

Thorough preparation is not just about building your fact basis with financial and operational information. As important is to find out what you can already learn about the culture of the target company and its key people. Today the world is becoming more and more transparent. A lot of information on this topic is already available on the world wide web. Have you scanned the web where people express their opinion on the company they work for or work with? What do the reviews say? How is customer service valued?

Building a trust relationship

M&A is people’s business. Once the right target company is identified, a relationship can start to develop.

?For me it has always been very important that that relationship was based on trust from the beginning.

Openness and honesty are key ingredients to build that trust. Being fair and realistic. Look each other in the eyes. Do we want to work together on this? Will this become a successful partnership? Do both our expectations match?

Start immediately with the integration plan

And last but not least is the preparation of the integration plan to integrate the target company into the acquiring company. The earlier the better. Starting from the strategic rationale. How does the target fit in the current organisational structure? How will it report into the acquiring company? How do we manage the integration? What does it take?

The integration of an acquired company is a complex process. Both companies have their own history, their own business model, way of working, processes, systems and culture. An organisation consists of people and these people are key to delivering the results and its success. Cultures often clash. It is important to assess what the most important qualities are to achieve the strategic objectives that the acquiring company intends to achieve. How can we nurture and grow these qualities of the target company in the best possible way? How does the culture of the target company fit with our company? With the current target company culture, can we make the integration into our company a success? What are the key values for the company culture in the combination? All these questions would need to be addressed as part of preparing the integration plan.

How important was culture in your integration plan? It would be great if you share your views and experience.....