How to Maximize Improvement for Both Acquirer and Target After M&A
50% of acquisitions are unsuccessful. That’s scary for the acquirer who’s taken a financial risk, and perhaps even scarier for the often smaller and less veteran target. Even huge businesses, some of which are serial acquirers, make mistakes. Meanwhile, successful acquisitions can spell out major ROI for the acquirer and fat dividends for investors.
That’s why there’s always tons of speculation over which targets powerful companies might acquire. You’ve done due diligence, verified the various types of potential value: personnel, portfolio, performance capacity, etc. You’re pretty sure solid ROI is in your immediate future. Boom. Acquisition is complete. Now what? The road of risk is spread before you, and so much can go wrong from this point. But what if you could view your acquisition as a viable chance to improve your company and the target you’re taking over? Here are 6 key maneuvers to get you there.
1. Winner’s Vision
You’re a sharp buyer. This means you identified the ideal target via the famous dictum:“pick winners early”. For the target, the takeover should spell out great potential realized. If the potential has already run its course in the target’s previous life, there’s no room for improvement. You seized on this in picking your target, but it can’t end with that initial choice. This needs to be your guiding vision going forward, too. You picked a winner, you picked early, now follow through by developing their business and driving it to greater efficiency, safety, employee engagement, and profitability.
2. Harvest strengths, purge weaknesses
Acquisitions should always be with an eye towards improving the target company’s performance—as opposed to inheriting a company’s strengths and weaknesses as-is and factoring them in resignedly. How can their existing strengths better your business? How can your business help them transcend their old weaknesses? What weaknesses do you have in common and how can this new partnership give aplatform for a fresh start that will improve both businesses?
3. Line Up Leadership
The first step to a smooth transition is identifying the right leaders from both sides of the acquisition and establishing a team to plan and execute this major change. This team should always include management that is close to frontline to ensure efficiency is maximized on all levels. Your team needs to be able to roll with the punches as unexpected turns are the norm here. Remember that the transition leadership team may very well be the people who end up having to cull (see next step), so choose them carefully.
4. Consolidate for maximum efficiency
Does the target’s unification with your business create any overlap? Perhaps the expansion of scope has spelled out significant excess capacity? You might need to consolidate processes, systems, or possibly positions. This might mean saying goodbye to folks. It’s best to make a clean cut of it, so any laying off should be planned before the acquisition, and completed immediately upon finalization of the takeover. Aside from maximizing efficiency by avoiding periods of functional redundancy, it will also minimize the cesspool of paranoia that tends to bubble up around M&A.
5. Don’t Forget, Don’t Deprive
Don’t let this sensitive time see either your existing company become old hat, nor the acquiree become swallowed up by the larger firm. The continued project of increased efficiency for you (the acquirer) needs to carry on as you work on efficiency within your target. Everything has to happen quickly at this stage, but remember that god is in the details: the acquired employees need to know how to navigate your company, and managers from your company need to understand the structure of your target. That brings us to the final step:
6. Become Bilingual
Before rushing in to dictate the new ways of the land, take some time to really observe the target and get to know its culture. Start speaking their language. Figure out how your acquired business’s culture can best meld with your company’s. Learn the best communication and leadership style to fit the existing culture. You can always choose to be an oppressive colonizer stubbornly refusing to learn how to navigate the topography of your new conquest, but don’t be surprised if you’re met with guerilla resistance.
To wind it up: through excellent communication and a focus on maintaining the acquirer's efficiency and increasing efficiency in the target, you can come out of the takeover with a more profitable business overall, maximizing value and ROI.
Article at: 6 Steps for Acquisition Success:
For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at info@buysellflbiz.com or 239.738.6227. Also, visit our Edison Avenue website at www.edisonavenue.com and my personal website at www.buysellflbiz.com.
No comments:
Post a Comment