Current Newsletter Archives Subscribe "The Plaid Group has a genuine passion for making things work."   Click here for more testimonials.		Plaid Group Newsletter   Join The Plaid Group mailing list and you’ll receive a free bimonthly email newsletter filled with insights and ideas you can use to enhance your company’s operational performance, spur growth, and increase bottom line profits.           No Buyer’s Remorse With a clear vision and focus, you can maximize the value of your acquisitions. by Tim Smith, Principal       [ Print Version ] Acquisition Rule No. 1: The handshake is just the beginning. There’s no doubt that acquiring a company can be exciting. It’s a great way to gain market share, add needed resources, eliminate competition and strengthen the bottom line.   In fact, savvy business managers know that when managed properly, acquisitions can enable companies to supercharge their growth versus what can be achieved organically. But the key to any merger or acquisition is that it must be undertaken with a sense of purpose – there must be a strategic reason why you are joining forces with another company. You must have a clear vision for the merged entity that underpins the myriad of decisions you will have to make to carry out your objective.   Over the years, I’ve worked with a number of clients that have grown through acquisition. Some of those companies were aggressive on the front end, yet short-changed the actual implementation. Consequently, their strategic intent was undermined by turf battles, the loss of valuable employees and eventually, a decline in business as important customers drifted away.   My work with those companies involved establishing best practices for core operations activities – identifying and championing the best of both companies to maximize the value of the new entity. In doing that basic work, we usually discovered a lack of shared understanding – employees had no clear direction as to what the newly combined organization was really trying to do.   Not just the thrill of the chase It’s not uncommon for management teams to focus on the “transaction” of acquisitions and ignore the fact that merging two distinct entities into one is a process, not an event. The purchase transaction is only one of many needed steps.   Of course, for some businesspeople, acquiring companies is like a big game hunt. The thrill is in the chase. Once they bag their prey, they move on to the next target … leaving the responsibility of making the merger work to everyone else.   And in those cases, what you usually get is chaos and a diminished return on the investment. That just furthers the idea that another acquisition is necessary since earlier ones did not provide the expected boost.   But it’s important to realize that you don’t acquire the benefits of a purchased company until you fully integrate the new organization. You must invest the time to ensure that there is a detailed plan to bring the two companies together properly, and the management focus to execute the plan.   And most importantly, you must develop the vision and set the direction. What will the newly merged organization look like? What is your post-merger strategy? And do the employees of both organizations clearly understand those objectives?   Getting maximum value Consider the steps you take to implement a new software application. You buy or license the software, have it installed on your server, possibly train employees on its use … but it still only adds value when you make it part of your existing operations. And chances are you’ll have to make adjustments to the way you work in order to maximize the software’s benefits.   Now think about what happens when you acquire a company. How will the new company fit with the existing one? And how must your company change to maximize the benefits of having the acquired company?   The cost of not managing the acquisition can be enormous. Post-acquisition activities can lower productivity and slow the organization if employees are distracted and disorganized.   The successful integration unites both the technical aspects of the businesses and the different cultures. The best way to address both simultaneously is to get people working together as quickly as possible to solve the business problems and accomplish results. One way to do this is through short-term projects that are aligned with the long-term integration plan and business strategy. Departmental or functional integration groups – comprising key employees from both organizations – can quickly identify issues, make recommendations and lead the development and rollout of policies, processes and solutions that blend the two entities into one.   In other words, management should see this “nuts and bolts” work as critical to obtaining maximum value in the acquisition. It is even more important than any negotiating skill required to bring the two parties together in the first place.   Nine steps to success Studies of acquisitions, both successful and not so successful ones, highlight several factors that contribute to the success of an acquisition. Here are nine tips for ensuring acquisition success.   Keep Your Focus. Stay close to the existing vision of the acquiring company. Combining two organizations is difficult enough without altering the firm’s big picture vision. Preserve the main focus of the firm and you’re more likely to get the results you seek. Establish Acquisition Goals. What are the goals of the acquisition? That is, what benefits do you want to realize from the acquisition? Go beyond continually broadcasting your company vision. Be sure to set and communicate clear goals for everyone to use as touchstones for guidance. For the goals to be most effective, remember to make them SMART – Specific, Measurable, Achievable, Results-oriented and Time-bound. Plan Integration Early. Plan, as early as possible, how you will integrate the physical and human assets you acquire. Start this planning long before the transaction closes. Your plan should outline the prioritized, post-acquisition initiatives, as well as the related logistics. For each initiative, describe what is to be done and specify the completion and milestones dates, team members and criteria for success. Simplify Your Organization. The more complex your organization, the harder it is for others to get acclimated and productive. In preparation for the acquisition, simplify your organization by establishing best practices for routine operations. Act Quickly. Capitalize on the momentum of the transaction by quickly integrating and pursuing available cost savings. Your early efforts to plan how you will integrate will help establish direction and reduce the integration chaos. If you plan to integrate operations, keep in mind that the more variability you have in your routine operations, the more difficult the integration will be. Establish an Integration Team. Appoint a leader of the integration effort and provide a team of resources. The leader must be able to guide integration efforts on multiple fronts. Use a team charter to define the team’s purpose, goals, participants and their roles, budget, other available resources, sponsor, interim and final milestone dates, etc. When selecting team members, choose employees with influence – the opinion leaders who have a stake in making the acquisition a success. Integration work is complex and demanding, so establish appropriate incentives tied to the success of both the leader and the integration team. Communicate More than You Think Necessary. Respect the differences between the organization cultures and avoid culture clashes by relentlessly communicating with employees. Don’t just talk at employees. Create opportunities to identify and address issues, clarify direction, reinforce goals, etc. The ripples of an acquisition affect more than just the employees, so don’t forget to maintain clear channels of communication with customers, key suppliers and other stakeholders. Hold on to Your Talent. A key asset of most acquisitions is people, so take deliberate steps to retain the talent in the acquired company. No amount of documentation can replace the institutional knowledge that resides in the heads of the employees who walk out the door each day. Keep Your Customers. One could argue that keeping customers is perhaps the single most critical factor in the success of an acquisition. But you won’t be able to keep your customers if you don’t tend to the other eight issues outlined in this list. How are you monitoring the effects of the acquisition on your customers? What message is your sales force sending the market? Are the messages coordinated and aligned? If the acquisition includes valuable new product and service offerings, does your business development team understand those new offerings, as well as the related company strategies? When the ink is dry … Smart negotiators would never overpay for an acquisition. They drive a hard bargain at the negotiating table in an attempt to get maximum value. But the post-merger integration is even more critical to long-term success, and it’s often overlooked.   When the ink is dry on the contracts and the champagne is long gone, don’t wake up with a bad case of buyer’s remorse … manage the integration properly and you’ll reap the benefits.   More Information? If you’d like to learn more about the successful integration of acquired companies, please send an E-mail to info@plaidgroup.com, visit our web site at www.plaidgroup.com, or call us at 713-627-3569. The Plaid Group publishes a free bimonthly e-mail newsletter filled with insights and ideas you can use to enhance your company's operational performance, spur growth and increase bottom-line profits. To subscribe, change your e-mail address or unsubscribe, please visit www.plaidgroup.com/newsletters_subscribe.asp.   Author's Note: Tim Smith is a Principal with The Plaid Group. The Plaid Group helps companies simplify and stabilize their business operations to improve financial performance and gain a competitive edge.   Copyright 2008 The Plaid Group