My business life can be divided in two parts: one, is startups that work and are within industries that are in high demand at that moment, possibly to emerge as potential biggies; another is boosting revenues and valuation as we go along the journey with high valued, well-planned mergers and acquisitions that speed up that process.
Whether you see an opportunity to merge your company with another or to acquire a smaller player in your commercial niche, or you decide that you need to find such an opportunity to improve the value of your own organization, getting into the world of mergers and acquisitions can be a lengthy, fulfilling and sometimes risky business.
In his article, Six Tips for Avoiding M&A Failure, Vincent Ryan from CFO claims that around 70% of mergers and acquisitions fall short of the goals and expectations of the participating parties. However, as Ryan also points out, most of these failures result from some common errors which, with sufficient planning and diligence, can be completely avoided.
With the right approach, your company can utilize mergers and acquisitions to strengthen its position, penetrate new markets, increase revenue, reduce costs, or achieve growth which might otherwise require a great deal of time, effort and in all honesty, let’s say: luck.
Try These Tips to Ensure a Successful Union
Getting mergers and acquisitions right is no black art, but, of course, there are some key principles and tactics which contribute largely to the difference between success and failure. Hopefully, the following five tips will give you a little insight and enlightenment, as well as helping you in practical terms when you decide to buy, enter a partnership, or merge with another enterprise.
#1: Don’t Lose Sight of the Goals
First of all, it’s vitally important to know what your company needs to gain from a planned merger or acquisition. That should be fairly obvious. Perhaps less obvious is the possibility that before, during or even after the union has taken place, your team loses sight of those goals or gets caught up in the excitement of possibilities that weren’t in the original plan. This is something to guard against. Know exactly what you plan to achieve from day one and ensure that remains the key focus throughout the merger or acquisition and beyond.
#2: Remember There Are Customers Involved
Whatever commercial segment your company operates in, your customers are at the very heart of what you do—so don’t neglect to think about them as part of your merger or acquisition considerations. Darren Dahl, a freelance contributor for the New York Times, asked Paul Burmeister, a professional services specialist, for some acquisition hints in his OPEN Forum article 7 Steps to a Successful Company Merger or Acquisition. Burmeister says it’s especially important to perform due diligence on the relationships between your target company and its customers. Once they become your customers, you’ll need to ensure you can maintain those relationships and hopefully even improve them.
#3: Don’t Call it Something it’s Not
Nothing will create a breakdown of relationships between merged companies faster than a lack of honesty and subsequently, trust. One aspect of a merger in which trust is a major factor is the degree of equality expected by both parties to the agreement. Plenty of mergers, even those between large corporations, have foundered on the rocks because the more powerful partner treated the situation more like an acquisition. Business authors Rodd Wagner and Gale Muller stated in a piece for Gallup’s business journal, that an up-front and honest discussion and agreement about the division of power, labor, and responsibilities should be conducted prior to a merger. Even more importantly, the agreement should be adhered to going forward. This is Key!
#4: Focus Strongly on Talent Retention
Here’s a major irony of mergers and acquisitions: It’s the people who provide the potential to make a merged enterprise more valuable than the sum of its parts. All too often, though, a merger heralds the departure of the most valuable talent in one or both organizations. If you want a merger or acquisition to work, you need to consider employees early on and decide how you will prevent an exodus of key talent.
Three key factors that can contribute greatly to talent retention, as identified by HR professional Kazim Ladimeji in his Recruiter article, 5 Strategies for Retaining Key Staff During a Merger or Acquisition, are:
• Identification of the employers from which your new company will benefit most
• Early communication with employees to curb apprehension and allay concerns
• Retention agreements and bonuses to demonstrate that you value what together each company’s employees can bring to the party.
#5: Make Sure IT Can Play Nicely
While it’s critical to get the HR formula right for successful staff integration, the success of today’s mergers and acquisitions also depend heavily on systems of intelligence. From the moment your company sets eyes on the prize, technological, as well as cultural compatibility, should be firmly in the sites of your project team. Ask yourself:
• Will you be able to integrate the business information systems of both companies?
• Will one party have to completely migrate onto the other’s platform?
• Will an entirely new solution be required?
Answering these questions will save major headaches and perhaps major cost concerns for those with IT responsibilities in both organizations.
Nothing Ventured, Nothing Gained
Most commercial ventures are replete with a degree of risk, mergers and acquisitions being no exception. However, there’s no reason why your future merger and acquisition plans should be among the 70% that don’t pan out as intended. The tips above will help ensure success, whether yours is the acquiring company, the target enterprise or an equal partner in a merger.
For more practical guidance and advice on business development, leadership and entrepreneurship, remember to stop by regularly at my personal website, www.aniketwarty.com.