When the road to building a new product is likely to be a long, costly and even lonely route, a well-selected company acquisition can be a great way to go. However well selected your acquisition, it’s still worth doing right!
We know that 75% of all acquisitions fail, which is about the same percentage of marriages that fail. Mergers are more successful than acquisitions. Mergers by comparison fail only 50% of the time. So treating your acquisition like a friendly merger makes good sense.
At HCG we’ve seen friendly and successful client acquisitions in the healthcare industry and unfriendly failed client joint ventures and mergers in the engineering industry – that were unable to capture the desired synergies. Our client experience reveals six elements that are important for successful acquisitions and probably successful marriages too!
- Have an engaging and dynamic implementation plan, but stay flexible and adaptable to changes as the acquisition takes place.
- Even if your acquisition is ‘state of the art’, don’t stop learning and developing your own organic future. Take space regularly to ‘go back to the drawing board’ and enough time ‘in the lab’ to keep evolving in your own right.
- Make sure parties come together from similarly low debt positions. This will make the funding of ongoing projects both possible and easier.
- Ensure the acquiring party has good levels of surplus cash upfront with little or no debt.
- Due diligence means more than ‘meeting the parents’. The health of both parties needs to be carefully evaluated (capability, cultural, employee IQ, management EI, financial, ethical and overall track record).
- Synergies gained must be obvious. Key synergies can be realized quickly, if parties have differing but complementary resources and capabilities.
In the final analysis, selection is key. Companies can fall blindly in love with their own ideas about who to get into bed with. Many firms have trouble seeing the right acquisition for them. At HCG, we offer you a fresh set of eyes and some tough pre-nuptial questions to make sure your next acquisition drives the value you are looking for.