10 Tips for Making a Successful Acquisition

Mark Zuckerberg's acquisition of Oculus only took three and a half days. Your acquisitions will likely not be as quick or as easy, but there are ways to cut out some of the red tape and ensure they will be just as fruitful as Facebook's.

Last week, Mark Zuckerberg introduced himself to the CEO of Oculus, a virtual reality hardware firm. Three-and-a-half days later, after an intense closed-door meeting, Facebook acquired the technology start-up.

Your acquisitions will likely not be as quick or as easy, but there are ways to cut out some of the red tape and ensure they will be just as fruitful as Facebook’s.

Bain & Co. says that successful acquirers do four things right. They:

  1. Consider M&A an extension of their company’s growth strategy

  2. Develop a clear view on growth opportunities and M&A needs

  3. Plan for opportunity long before an opportunity arises

  4. Build M&A programs around frequent, continuous deal making

M&A expert David Braun points out that the biggest acquisition mistake a CEO can make is only going after companies that are available. Many leaders take a “reactive rather than a proactive approach,” resulting in finding only those opportunities that are exist instead of ones that fit your long-range goals, he posted in his blog.

According to McKinsey, an acquisition would be right for your company if you can achieve one of the following goals:

  • Improve the target company’s performance

  • Consolidate to remove excess industry capacity

  • Accelerate market access for the acquired company’s products

  • Get skills or technologies faster at a lower cost than they can be built

  • Pick winners early and help them develop their business

The Facebook-Oculus deal will achieve two goals: For Oculus, Facebook’s human capital and deep pockets will allow the start-up to expand and scale much faster than it could on its own. For Facebook, Oculus provides access to technical capabilities the social media firm didn’t previously have.

There are additional strategies, McKinsey says, that are harder and more difficult to implement, including consolidating highly fragmented markets where the existing competitors are too small to achieve scale. Also, price reduction or stabilization won’t happen unless a market consolidates down to three to four companies, and is not a good reason to acquire a company.

Sometimes, when two companies are brought together, the goal is to create an entirely new company, such as when Ciba-Geigy joined forces with Sandoz to become Novartis. This type of transformation is challenging and requires an extensive strategy to be executed well on both sides. In the case of Novartis, the new company has been a success, generating $1.4 billion in cost synergies, as well as opening up new global markets and R&D opportunities, according to McKinsey.

Ultimately, companies that are most successful at reaping the benefits of M&A are those that use it to their strategic advantage and build it into their long-range planning process.

Additional reading:

Bain & Co.
https://www.bain.com/consulting-services/mergers-and-acquisitions/acquisitions-strategy.aspx

[The] Top Mistake Leaders Make When Pursuing M&A
https://www.successfulacquisitions.net/top-mistake-leaders-make-when-pursuing-ma

The Five Types of Successful Acquisitions (McKinsey)
https://www.mckinsey.com/insights/corporate_finance/the_five_types_of_successful_acquisitions

 


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.