In the first post of this acquisition challenges series, I discussed how challenging integration can be and some of the key lessons I have learned over the years. Given the many stories behind some of these lessons, I’m going to share a few more thoughts about each, starting with deal drivers.
One of the lessons was around establishing key deal drivers with clear performance goals. Any acquisition should start with a premise of what is the strategy for the core business, and how can an acquisition support that strategy. There is usually one core source of deal value from acquiring a company, as well as several related benefits. Be sure that deal value is clearly articulated and shared across the organization as it is a critical lens from which to make future decisions.
Focus on the Value Source
One common source of value is a consolidation play. Two businesses have overlapping customers and cost structures, and the goal of the acquisition is to merge the two businesses and reduce cost. This is often an easier type of acquisition because 1) consolidations can be controlled more internally (versus relying on customers/sales) and 2) you can make a decision to execute and see the results immediately. Needless to say, integrations like this can still be tough on culture/morale and customer migrations but there are ways to manage, especially if the combined business improves the underlying cost structure and customer value proposition.
Another common source of value is new customers/markets. This type of value is often riskier to achieve because it relies more on external support (customers) and you don’t immediately see value Day 1. It is easy to fall trap to thinking you can increase customer share of wallet $X or that cross-selling across markets can easily leverage existing relationships. The reality in most scenarios, is it takes way longer than projected. Sellers must be trained, buyers may be different, product may need tuning, etc. and all these can prolong getting new revenue. I have learned this the hard way! On one deal, we projected a meaningful part of revenue growth by selling an acquired company product into a new market that our core company was already in. For the first three years, we struggled for a variety of reasons. Ultimately we started to see the traction we expected, but it took much longer than expected.
Integration takes way longer than projected.
Don't Get Distracted by the Little Decisions
Regardless of what your key deal driver is, it surprisingly becomes easy to lose focus on that value once integration gets going. Things like getting employee emails and badges set, benefits, job titles, re-branding, etc. all attract attention to be resolved immediately. Collectively, they can distract from the key deal drivers that may have a longer time horizon to realize. One strategy I’ve seen to help is separate the big decisions from the little decisions. Have clear metrics that tie to the key deal drivers, display, discuss and monitor those metrics with the team, and ensure that team resources are disproportionately aligned to hitting those drivers.
Focus on the Customer
Lastly, make sure to maintain an external focus during integration and communicate the value to customers. Regardless of the deal driver, customers know an acquisition has happened and often expect changes (some good, some not so good). You want to capitalize on their excitement/minimize their concerns and keep sharing with them the additional benefits/changes they will receive (and when) coming out of the integration efforts. Integration also allows you to improve/resolve pain points in the current base business, so use integration as a way to re-position and innovate your company to your customers with a strong vision of the future and growth!
In summary, have a clear deal driver, share it with team/customers, and prioritize resources/focus to deliver that value.
Read the third part of this acquisition series here.