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Removing the Blinders: 5 Principles for Acquisition Success

While JP Morgan recently predicted that a strong 2014 would lead into a fresh round of M&A activity in 2015, it also noted last year’s level of failed transactions was the highest since 2008.v

Keeping your eye on the ball when planning an acquisition is critical. Just as important is paying attention to what’s in your peripheral vision. The best laid plans can quickly derail when you operate with blinders on.

Blinders are a common condition that keeps you from seeing what’s just out of view. Failing to plan for them can keep you from successfully staking out a new competitive position, responding to customer demands with an expanded product portfolio, or making a strategic buy to branch into new markets.

“Make sure your team has a forum to share new information to facilitate decisions on strategy, direction, and possible changes to the plan of record.”

Follow these 5 principles to keep a clear line of sight in every direction.

  1. Cast a wider view. Often, issues two to three degrees away from core operations are the ones that can potentially devastate the deal. Most companies know to look at how any change will affect customers, internal functions, and those of the target acquisition. Look further out to assess the broader ecosystem of partners, suppliers, competition, regulatory bodies, and joint ventures with operations and manufacturing facilities.
  1. Create a forum for new information. Everything is subject to change. Regulatory shifts, competitor moves, supplier relations, even new products being developed in a different division of your own company could pose a threat. Make sure your team has a forum to share new information to facilitate decisions on strategy, direction, and possible changes to the plan of record. Operating on yesterday’s data is a bad idea.
  1. Keep the deal team involved. When the deal team driving the upfront strategy knows they’ll move on before the integration settles in, it’s easy to rely on original assumptions instead of the reality of what’s happening once the deal’s underway. Keep this group involved by making them liaison to the operating team or establishing an advisory role. Giving them skin in the game through the realization of returns reduces the likelihood of finger pointing if things go wrong.
  1. Watch the brand: Change affects reputation. The deal team most likely had conversations with marketing. The risk is they didn’t talk with partners, suppliers, regulators, or customers. At minimum, commission an impact analysis across the entire stakeholder ecosystem to capture any potentially negative or confusing brand impressions early, and adjust communications before reputation issues run amok.
  2. Have an exit strategy. Nobody wants to plan for failure, but if this is the one that throws the company off its long-term track, better to deal with it early than dealing with a lot more down the road. Identify the triggers that tell you when you need to adjust, and even when you should jump ship.

When stakes are high, starting and staying on the right path is serious business. Put your leadership, deal team, and a cross-section of functional experts in a room and be sure they communicate with blinders off. Focus on what could make the deal fall apart. Run through the scenarios and address the risks that emerge. Get comfortable having uncomfortable conversations.

When critical issues are blocked by blinders, actions focus only on a narrow view of the enterprise. To succeed, you need to understand the entire ecosystem. If you can’t address how the acquisition could negatively impact the company, you’re not ready to address how it can help.


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