There are plenty of good reasons to acquire another business, but only after you've answered some critical questions.
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The pursuit of growth typically involves, at one stage or another, merging with or acquiring another business. While some may choose to stick to organic growth, mergers and acquisitions (M&A) can help high-potential businesses realise their longer-term growth objectives much faster.
A successful M&A strategy is defined by a specific mission: for example, the acquisition of new technology, the desire to increase company value, or the need to acquire staff with a certain skillset (known as acqui-hiring). Often, it’s a combination of all these reasons.
Once you know why you’re embarking on an M&A growth strategy, you need to overcome an initial set of challenges. Namely, identifying the key business decision-makers at the company you want to acquire or merge with, building good relationships with them, and negotiating the terms and cost of the deal.
This process also involves asking some important upfront questions. I recently oversaw Bullhorn’s acquisition of Connexys, a recruitment software company based in the Netherlands – and I found that answering these five ‘Ws’ was crucial in preparing for a successful transaction and transition.
Who should we include in the acquisition process?
The answer to this varies from company to company but, typically speaking, a successful acquisition must involve immediate input from senior leadership – from both organisations – across all critical business functions: HR, technology, sales, marketing, and finance.
Once the strategy has been decided, the next step is to involve your senior managers to lead the successful roll-out of this strategy throughout the two organisations and the various teams therein.
What do we tell our new and existing customers?
To ensure any merger is met with equanimity, a comprehensive communications plan is vital. This needs to include FAQs and supporting documents that pre-empt all stakeholder concerns and queries.
Communicating an acquisition is not a one-off event, however. Regular updates need to be shared with all involved. Withholding information, for whatever reason, only serves to fuel a negative rumour mill.
Make sure your customers know that you have a strategy in place to manage the transition and keep them in the loop as change unfolds.
Change can be unsettling, so reassurance is essential. Emphasise the positive aspects of the acquisition and reaffirm that service levels will remain unaffected. Of course, what you say needs to be backed up by what you do – to convince your staff and customers that it’s business-as-usual, make sure that the quality of your service doesn’t drop.
When is right time to acquire?
There is no right time to acquire. However, there can certainly be a wrong time.
It’s never a good idea to pursue an acquisition during busy periods, including when you’re in the middle of a product launch or during major staff changes. This puts a huge amount of additional stress on business operations which, in turn, can compromise service levels.
M&As can happen very quickly: they’re not necessarily a long-term, ponderous process.
To navigate sudden and abrupt change, you need to be in a stable and secure position. Only then will you be able to make it a success.
Where will budget and resources be reallocated?
Post-acquisition, resources must be pumped into a variety of critical areas to ensure a smooth transition and keep the business operating smoothly.
People are, without doubt, a company’s primary asset. You need to keep all your employees happy and informed. Cultural alignment between the two organisations is therefore crucial.
The integration of the two organisations’ different systems and processes is also very important. This should include staff training where necessary to bring all users up to speed as quickly as possible.
Communication is important enough to get another mention here. Keeping all your stakeholders – your staff, their staff, your customers, and their customers – informed is a top priority and demands a solid investment.
Why buy growth and not build organically?
Organic growth takes time. What’s more, not all growth can be achieved organically – there are some things, such as technology, that must be bought.
An M&A strategy also makes regional expansion much more obtainable. Rather than step into new territories as an unknown entity and invest in organic growth, a merger with – or acquisition of – a locally respected business will help you gain traction in unfamiliar markets quickly.
Peter Linas is EVP corporate development and international at Bullhorn.