Firm acquisitions: common pitfalls to avoid
Acquisitions are exciting, even flattering, and can get the adrenaline pumping. There are some pitfalls to avoid:
- Not picking the “right” acquisition – does the opportunity presented match your business and growth plans? Sometimes opportunity knocks but the acquisition target isn’t exactly the type of firm you had thought of in your planning. That is OK but a hard look by senior management needs to appraise the benefit of this acquisition in context of other possible acquisitions in terms of reaching your goals.
- The excitement of the acquisition potential, obscures the amount of work required of both firms will have to do. So much work is required around the corporate infrastructure (the accounting aftermath, the human resource compliance issues, the IT and IP technology transfer, etc.) The corporate side of an acquisition taxes many people within both firms. It is a massive undertaking and a critical job but it is only 50% of the job.
- Not planning for after the deal closes: Here is the other 50% of the situation. I have never seen the planning, transition and start up given its due emphasis. Yet, it is this part that sets up the speed at which the benefits of the acquisition can be realized. Many firms ignore the acquired firm, thinking appropriate integration will “just happen.” 99% of the time it won’t. Leadership needs to facilitate interactions and relationships. A lack of clarity about team member’s relative position amongst acquired and acquiring firms creates chaos and wasted time and energy. I’ve seen that the jockeying for personal power sometimes overshadows the benefits the firm gained in the acquisition. Since careers are at stake, senior most leadership must work through competitions and be clear.
- Overwhelming the acquired company: Part of the importance of planning is recognizing that the focus of the company has shifted from running the business to being acquired. Then after the deal is done the overwhelming amount of integration meetings make it difficult to keep the business operating where it needs to. The phasing of activities and needs to be choreographed for impact and efficiency.
- Underestimating the sensitivities: The people most impacted by the acquisition are often threatened by the new team and vice versa. I have even seen examples of situations when deals made between the CEO/CFO and the acquired leadership are not shared with or bought-into by the existing leadership making for difficult communications and interactions.
- Over integrating: The trick is to optimize the places where the two firms need to fully integrate, where they might in the future and where they probably never will. Be sure to not do a blanket integration as the integration efforts should link to a specific benefit to get the most out of the potency of the integrated piece and the best performance from the acquired and acquiring firms.
Bright Operations can help you determine the priority, methods and implementation for integrating in a way that maintains the benefits of the acquisition that attracted you to the idea in the first place.