Growth is often a double-edged sword. For companies on a high-growth trajectory, acquisitions offer rapid expansion, but can also present a sizable risk if not integrated properly into the parent organization. Having managed 18 strategic acquisitions for Integrity Marketing Group since January 2018, a few practices have proven effective in welcoming new organizations and expanding our leadership team.
Transparency through peer conversations
We understand that intangibles such as culture, chemistry and follow-through play a significant role in deal success. Business owners and CEOs are rightfully cautious and need transparency and hard evidence before selling equity in a company they built themselves. For that reason, we offer peer conversations with fellow CEOs who have already gone through the process and become leaders in the parent organization. This step is valuable not only to confirm the steps taken in previous integrations, but to provide CEOs with assurances that their company will be able to operate much as before.
This was exactly the type of reassurance that one company was seeking. As the normal due diligence process continued, the principal owner was provided with the opportunity to discuss the potential sale of one business unit with former owners that had completed the same process just months prior. This open dialogue provided confirmation that the acquisition would go as planned and gave valuable insight into the many intangibles that contribute to a positive culture following integration. As a result, this particular owner decided to sell two business units instead of one.
Don’t Fix What isn’t Broken
This is a hard truth, but too many CEOs become fixated on their own success. We often see what has made our own company successful and project that definition onto other organizations, including prospective acquisitions. Success can be an elusive goal, particularly in a sales environment that is dependent on long-term relationships and a high level of trust. That’s why a significant part of our integration plans call for less disruption – letting acquisitions continue with systems and processes that have made them successful. At the same time, we augment this effect by removing back office functions that can distract from core business operations.
That is the approach we took with one company that had identified a market opportunity but could not scale their operations quickly enough to take advantage. After the acquisition, we allowed them to redirect their resources towards sales and marketing by taking functions such as HR, IT, compliance and accounting off their plate while also providing them with the capital to increase headcount and office space. The result was a 230 percent increase in revenue the following year.
Accelerate Positive Change
Of all the factors that can negatively affect the integration of a newly acquired company, time can be one of the most significant. After the long process leading up to deal closing, any delay in bringing about positive, actionable change in the acquisition can harm value creation. I have found it effective to provide acquisitions with immediate access to new products, including marketing materials, training and insights from peers throughout the parent organization. Then, over communicate the changes. Nothing helps an integration more than generating results, and we have found that providing leaders with the tools to increase revenue helps the transition on both sides of the table.
One company had experienced a period of flat revenue growth in part because of a product lineup that was too broad. Following the acquisition, we immediately narrowed their product mix and refreshed offerings to address current market demands. We also made immediate upgrades to employee benefits to stay competitive. At the end of the first year, they increased the number of insurance agents writing new policies by nearly 20 percent.
Overall, we have found flexibility to be the most valuable practice we can leverage when integrating a new acquisition. Every company is different and interacts differently when brought into the larger organization. Listening to owners, employees, customers and the market itself is essential so we can make course the corrections necessary for a custom integration that allows for mutual success.
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