How to Squeeze New Earnings From Old Acquisitions

A growing body of research has shown that 50% to 90% of acquisitions fail to pay off for acquirers. This means that traditional integration methods are not working. There are many reasons an acquisition might fail, but two recurring mistakes are the order and the depth at which the integration is tackled.

In the traditional approach, an organizational structure is formed immediately upon closing the deal, and shortly thereafter, an announcement is made that names the executives who will fill the top 30–50 positions. Since the acquirer’s leadership team knows very little about the qualities of the acquiree’s management team, they make these decisions based on imperfect data: resumes, performance reviews, and politics. This not only may result in the wrong people retained, it also leaves employees feeling like merit doesn’t matter.

Next, highly visible duplications of systems are eliminated, including branch networks, brands and large suppliers. Integrating these elements into a single operating platform is supposed to capture most of the expected efficiencies, while further incremental efficiencies would be squeezed out over time. In reality, this leaves significant complexity and inefficiency deep in the organization. Successful acquisitions do not stop at the big system integrations.

Here is a better way to ensure a successful integration, and ultimately, uncover opportunities for new revenue.

  1. Let duplicate management co-exist … for awhile. During the redesign of processes, managers’ natural inclination toward leadership, innovation, collaboration and execution will come to the surface. That information will next be used to develop the new company’s organizational structure. The cost of carrying duplicate management teams for a short time is a small investment to make in building the best leadership team for the future.
  2. Name a “One Company” 100-day task force reporting directly to the CEO. This task force should have high-potential junior executives representing all major areas of the company from both the acquirer and the acquiree. These people should have a passion for improving the company and for replacing disparate territorial behavior with one company behavior.
  3. Once your acquisition has been integrated, have the task force identify the places where duplication and complexity created by old acquisitions still exist—multiple systems, different ways of handling transactions, minor variations of legacy products and services, vendors and purchases that should be consolidated, etc. This task force will uncover many areas ignored by the traditional approach. These can now be targeted by specific teams to fix. If your acquisition has not yet been integrated, then take the broader approach described in the next point.
  4. Create teams of both acquirers and acquirees across the entire entity to work closely with the One Company task force. In 100 days, these teams should jointly design the most efficient processes used every day by the people closest to the work and closest to the customer. These activities will drive most of the expenses and revenues of the company.

In some cases, the acquirer has the best process; in others the acquiree has the best process, and many times, a new process must be created that leverages the new strengths of the combined entity. Getting these activities right is often essential for an acquisition to pay off.

Another benefit of joint teams is that as both sides work and make presentations together, a unified culture begins to form naturally.

Why only 100 days? Because short, intense, campaigns create urgency and focus.

CEOs who dive deeper for acquisition efficiencies, as well as missed revenue opportunities, add millions in earnings, reduce complexity, and increase employee engagement. They also reinforce a culture of “one company” going forward.




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