Having been involved in Merger & Acquisitions (M&A) for 20+ years, I can confidently report that when done correctly it’s one of the most powerful forces for growth and change… or alternatively it can bring a previously successful organisation down!
There’s certainly nothing new in that statement, and there shouldn’t be, because everyone saying it is correct.
The main question is why do some organisations succeed repeatedly in a M&A strategy and others failure catastrophically.
In my last organisation we completed 25+ acquisitions within a 10-year period and there lies the first clue for success. If M&A is going to be successful it has to be part of the natural cadence of the company, and the organisation has to be structurally ready for the change that follows.
I would never say we did 25+ acquisitions and they were all a roaring success, and if anyone says they have a recipe for getting M&A right every time, you should run a mile. It’s simply about understanding the basics and giving you the best chance of success.
Far too many text books make M&A a deeply philosophical exercise, reciting various types of human behaviour and countless commercial theories, when really, like so many things, it comes down to purpose, planning, and people. All of which can be tackled proactively, and if combined with strong leadership and transparency, will give a much better chance of success.
The most important aspect of any M&A strategy is Purpose, which is different from so many textbooks which say People. If it’s not crystal clear why the transaction is taking place, it will normally fail; and the answer can’t be something vague like ‘growth’. It has to be defined, aligning with the broader Vision and Strategies, and absolutely transparent to all stakeholders. It could be to supersede something, to add depth or breadth, or maybe just to consume; but this has to sit alongside what it brings to questions of technology, markets, geography, succession, etc. The Purpose question is absolutely fundamental and should always be part of a proactive move, and never used as a plaster to cover up the sins of the wider organisation.
Next up is Planning, now this is a fairly big subject, but its starting point is three-fold; do the plans align with the purpose, is the organisation ready for the change that will follow, and how are we going to quantify success? Far too many organisations use qualitative measures for analysing integration, from experience I used 90% quantitative and 10% qualitative.
Finally, we have People, although one of the most important assets for any company, no M&A strategy should be defined by People. The target is always clear, you want an integrated organisation with strong employee engagement and increased productivity, to say anything else would be slightly odd. So what’s the best way to achieve this? As always it’s about honesty, fairness, and transparency. M&A will involve tough decisions and strong leadership, but the quickest way to lose integrity and respect is by not being upfront about the challenges. This is why having a coherent golden thread through your Vision, Strategies, and Plans is so important. When big decisions are being made, justifying the reasons on the day for the first time is tough. If decisions are set against the context of where your business is and the aspirations of where it’s going, it provides a stronger backdrop for conversations.
I’m slightly biased, but for me acquisitions would always be one of the strategies for growth. However, there’s no doubt, the more work you do in advance, the more focused you are on reasoning, and the clearer you on what success looks like… the better chance you have of being a company for whom M&A is transformational.
If you’re interested in learning more about M&A, please take a look at the M&A training course offered by Plumtree Consultants.
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