Is Your Company Ready To Grow Through Acquisition?

As a CEO in a dynamic industry, I’m constantly aware of the pressures to grow rapidly, innovate, and provide a more robust solution set. Recently, my management team and I began taking a hard look at whether an acquisition could be an effective way to facilitate achieving our strategic goals.

Our company has a great track record of organically building market-leading solutions, so we struggled with the question of whether we should take on the potential complications and unknowns of inorganic growth. Ultimately, we realized we could accelerate our speed-to-market and competitiveness by acquiring products that complemented our existing solutions. That’s when the real work began.

What to do before an acquisition to prepare and minimize risks

Our journey of deciding to do our first acquisition, executing it, and then integrating it was a valuable learning process that is relevant for most growth-oriented CEOs. Following are the steps we took and the lessons we learned during the process.

Align acquisition with company strategy. Acquisitions should be an offshoot of your strategy not the strategy itself. In our case, we identified product gaps that could be filled via acquisition, which would provide us with a more comprehensive, integrated solution portfolio that would allow us to provide more value to our clients. Our primary objective was to fill in all the gaps in a way that increased our value to clients and improved our competitive differentiation.

Build consensus with key stakeholders. Once you’ve gaveled on a strategy and how acquisitions fit, you need to achieve alignment with your board and keep them involved throughout the process. If, like mine, your board consists of private equity investors, they will have more experience with acquisitions than you. Make sure to benefit from their wisdom and buy-in as you go through this. We created an M&A working group consisting of a few members of our board and conducted bi-weekly meetings with them. During each meeting, we talked through the pipeline of acquisition targets, strategic rationale of various targets, and shared details to keep everyone informed and invested in the process.

Build the internal muscle. Recognizing that identifying, evaluating, and completing an acquisition is a full-time job, we hired a full-time corporate development team. This team is responsible for building the deal pipeline, evaluating potential acquisitions, leading due diligence, and facilitating closing the deal. Building internal muscle also includes preparing the rest of your company to digest an acquisition. You will need other parts of your company (sales, operations, IT, etc.) to be involved in the evaluation, due diligence, and integration. As such, you’ll want to make sure they have the capacity to take on the additional workload. By communicating early and getting everyone aligned around the plan, your team will be more receptive to the inevitable extra work.

Consider how the cultures will blend. Most acquisitions underperform the deal thesis because they don’t have good cultural alignment, which manifests itself in many different ways. Think hard about the cultural fit between the two organizations and bring in your HR department to help you determine where things are dissimilar and where there is common ground. Getting culture right for the newly merged organization is critical to long-term success.

You’ve acquired a company. Now what? How to ensure the success of your recent acquisition.

• Your top priority is communication and ensuring that clients and employees hear from you early and often. I chose to place personal phone calls to our largest and oldest clients a few days in advance. The remainder of calls came from our client executives. During these conversations, we explained the strategic rationale for the acquisition,  and what’s in it for the client. As it relates to internal communication, nature abhors a vacuum—if internal teams aren’t hearing a clear message, they will make up one. We made a concerted effort to communicate early and often with team members from the acquired company and our legacy employees. Everyone will want to know “what does this mean for me?” and the sooner you can answer that question, the better.

• Create an integration plan and team. We created a 120-day integration plan to encompass all parts of integrating the new business. This included identifying an integration team and an individual dedicated to post-acquisition activity to pull the companies together and drive all the pieces. The integration team met daily at 7am to review progress and ensure we were meeting our integration goals, which includes monitoring financial targets to ensure the desired return on our investment is achieved on an ongoing basis.

• Combine the companies as quickly as possible. The two companies need to seamlessly become one organization, particularly in the eyes of clients, as soon as possible. From the start, you want to hold internal leadership team meetings with people from both organizations to share information, develop and finalize revised go-to-market and sales plans, and develop a new unified message so the combined company can quickly get clients and the market excited about its new capabilities.

The most important takeaway here is that if the acquisition works for your employees and works for your clients, most other things will take care of themselves.

What’s next?

There are always challenges, complications, and risks in executing and integrating an acquisition. But when it’s the right acquisition, the rewards outweigh the risks. Thanks to the time we took on the front-end finding a great company and paying careful attention to properly integrating the teams and technology, we had a successful experience. We are already evaluating our pipeline for our next acquisition target and expect to close another deal before the end of the year.

Jason Brown
Jason Brown is the CEO of Discovery Health Partners, a company dedicated to helping healthcare payers solve payment and revenue integrity challenges to improve financial outcomes. Jason has a 20-year track record of scaling and creating value for high-growth technology and tech-enabled services companies. He is a Phi Beta Kappa graduate of Morehouse College and earned his MBA from Harvard Business School.