If you’re the CEO of a well-established enterprise, you might have considered acquiring another organization to help scale at one point or another. Why move blindly into an unknown market after all, when you can merge with people that already know the way around? More than 44,000 companies have been acquired worldwide thus far in 2017, and at quite the hefty price tag. Transactions totaled $3.13 trillion this year.
However acquiring a company is no easy task; and for some employees involved, it can be downright traumatic. Throughout my time at my current company, I’ve been involved in 4 acquisitions, and there’s a number of cultural aspects every acquirer should keep in mind. Here’s how to present yourself as a positive acquirer, and not a shark:
Sell the acquisition as a partnership, and encourage growth
When acquiring a company, it’s important to be considerate of the existing team. The fact is, a great number of acquisitions fail. As many as 70-90 percent of them don’t work out, bringing a period of uncertainty for all parties involved.
“While the acquirer has made the deal for their own advantage, the focus should be placed on how both teams can benefit and become stronger together.”
One of the main reasons acquisitions break down, is because there is often a power imbalance. As with any new relationship, it takes time to build trust and a rapport. When acquirers jump straight in as a dominant force and start making changes too quickly, important members of the acquiree team are more likely to leave.
Rather than marking your territory as the new boss, the new relationship should be positioned as a partnership. The acquiree and their teams should be presented with the benefits of joining a larger company, and ways in which they’ll be supported and given opportunities to grow. While the acquirer has made the deal for their own advantage, the focus should be placed on how both teams can benefit and become stronger together.
As Roger L Martin, the former dean of University of Toronto’s Rotman School of Management, writes, “Companies that focus on what they are going to get from an acquisition are less likely to succeed than those that focus on what they have to give it.”
Encourage the founders stay on board
If you’ve ever worked for a startup, you’ll know few people are more committed to a company than the founder. Unlike other employees, founders see the company from a totally different point of view. The company is their brainchild. They are the heart of the entire organization.
For this reason, it’s advisable that growth-minded founders stay on board after the acquisition takes place. At our own company, we’ve always had founders come on – and the acquisitions have been successful, with the acquiree team playing an important role in pushing the company forward.
But still, when a company is acquired it requires change from everyone. And well, sometimes founders just don’t want to change. In this, an acquirer needs to identify – and accept – which type of founder they’re working with while the deal is still in the pipeline.
What I call ‘growth founders’ are interested in pushing their company on to the next level, and will continue to play an important role after the merger. ‘Lifestyle founders’ however, tend to want work with small companies and don’t crave growth. To avoid complications – or worse, and acquisition failure – it’s best a lifestyle founder doesn’t join the team. They’ll likely be happy to take the payout, and go on to build their latest, new venture.
Incorporate the culture or product of the acquiree
All too often, large companies impose their methods onto the smaller acquirees. However successful acquisitions should foster a balance of opinions and ideas, from both sides of the table.
The acquirer needs to look at what the acquiree can offer, and force themselves to identify one aspect to incorporate into the larger company. This might be a process, a cultural activity, a daily routine – or really, anything that shows the acquiree what they do is valuable.
When we acquired an Argentine software company, we agreed to promote the local head of marketing to a larger role – the head of marketing for the Americas. When we acquired an automotive electronics company, we decided that they’d drive our entire automotive business. And when we acquired a German IT company a few years back, we actually moved our CEO and global HQ to the company’s head office. These joint decisions showed the companies we acquired that we saw strength and value in what they were doing – and ultimately, led to healthy acquisitions.
Acquisitions might be financial transactions, however corporate culture plays a large role in their success. Acquirers need to ensure the merger promotes company growth for both parties – and more, ensure acquirees don’t feel brushed off to the side. While there’s a few horror stories to go around, acquisitions are positive, after all.