Good for you! Depending on your industry, organic growth alone could leave you playing catch-up with your competitors. But speaking with our clients, I’ve also seen that while growth by acquisition can be an effective strategy for expanding market share, it comes with significant challenges. Our work has given us a front-row seat because we’re most often hired to work with companies that are navigating significant change.
So here are some things that speak to why it’s so important to have good partners along for the ride. And since we’re only going to skate on the surface, reach out if you want to dive deeper.
The current market has driven prices – meaning that getting your hands on great companies requires a significantly larger investment. I’m not a finance guy- (cue the uproarious laughter from literally everyone who knows me) – so I’m not going to say anything further regarding that part of the equation. PE firms have the money to do this – and that’s why we’re talking.
However, the PE-driven M&A scene is littered with failed acquisitions, where things go wrong, resulting in an unfavorable ROI and unhappy stakeholders.
One of our clients said recently, “Successfully acquiring and integrating companies is like riding a motorcycle while reading e-mails on your phone in heavy traffic — possible, but requires numerous things to go exactly right to be successful.”
A few nuggets:
1. There’s no substitute for seasoned advisors when “venturing” into this territory (pun intended). You will, undoubtedly, have your legal counsel advising and, hopefully, an M&A firm that genuinely cares about your success. Granted, they’re incentivized to care about the financial outcomes, but I’ve met a rare few who genuinely care about your fulfillment as a leader. They’re out there.
2. Don’t short the effort you put into the integration. You’re not just blending systems, contracts, and leadership structures; you’re integrating cultures. Spend the time and effort needed to create a shared narrative about the integration that excites everyone: new and incumbent team members, investors, and the targets for your goods and services. You’d think this is “Captain Obvious,” but I’m surprised at how often it’s an afterthought.
3. Along those lines, what does the newly combined entity look and feel like? You must define the new brand ethos you’re now asking everyone to get behind. Once again, I’ve been surprised by how often the investor community provides back-office support and financial directives while failing to lean into the inevitable implications for the brand (story, visual identity, company ethos) they are expecting will grow.
4. It’s up to the acquirer to ensure this integration is effective while keeping core business objectives on track. You likely have a limited runway to increase the value of the core offering before the next round or the next big fish comes along–unless you’re planning to hold the new asset indefinitely. This doesn’t mean you have to do this work yourself. You are, after all, responsible for the growth of the business. But you must make sure that it happens. Third-party partners (Yes – people like us!) often bring needed objectivity and expert refereeing to this process.
5. And to the shameless pitch above, make no mistake; this decision requires brand therapy. Get people in the room who are good listeners and whom you trust to speak 1:1 with key stakeholders. Everyone needs to be heard. Hearing and synthesizing feelings and feedback can go a long way toward a successful integration.
Acquisitions will remain a significant strategy for companies to increase necessary market share, capabilities, and IP to power growth. Along with all of the financial, organizational, and regulatory boxes that have to be checked, make sure you get your story straight. Everyone will be better for it.