How to Manage an Acquisition

Wednesday, September 18, 2013 - 07:48

By Leon Gettler

Every acquisition looks great on paper. But studies show that most of them fail, usually because of poor cultural fit and bad implementation by managers. Buying a business or getting bought is difficult terrain to navigate. If it is done badly, without due diligence and careful planning, it will burden the business with horrendous costs. Done well, it is a win-win. That is the big challenge for managers.

Darren Dahl at Inc.com says managers have to be very clear about the strategic reasons for the acquisition and why it’s important for both companies. They also have to look at all the future potential problems and liabilities that need to be tackled early before they blow up. These would include integrating different information technology systems, human resources (particularly if there is a mismatch in corporate cultures), accounting (where the two sets of books have to be integrated and made as one), operations (important in determining if there are excessive employees or managers after the acquisition and where the space will come from if the facilities merge) and in sales and marketing, the people who will have to start selling new products produced by the merged entity.

Ron Ashkenas at the Harvard Business Review says managers need to first of all have the big picture of how they want the merged entity to be one year after the acquisition. Then they have to do “backward resource planning” by assessing what will it take to achieve it, what resources will be needed (e.g. teams, leaders, investments), what oversight and governance might be required and what skills would be essential. Managers’ time management here is crucial.

Ashkenas writes: “One of the fundamentally flawed assumptions that companies make about integrating acquisitions is that managerial and professional time is infinitely expandable. The reality is that the best people — the ones that need to be assigned to diligence and integration teams — already have full-time and important jobs. So when they are asked to also take on integration assignments, they end up making choices about what not to do. When that happens, all sorts of other things start falling through the cracks, which is why we often see, during integrations, a degradation of customer service, increases in cycle time, and other performance shortfalls … More importantly, unless managers are deeply involved, they won’t own the eventual outcomes of the integration process. So there’s no getting around the resource issues. What you as a manager can do, however, is prepare. Go into the integration process with a clear sense of the tradeoffs: Given the resources needed, what else can be stopped or delayed? What priorities can be reset? What goals need to be deferred? What work can be eliminated? What managers can be freed up to contribute to the integration projects? And will the eventual outcome be worth the effort?”

The UK version of Management Today says creating a new culture is the big challenge. It’s not about one culture replacing the other but more about taking the best bits from each company and creating something that’s complementary. That’s probably the most difficult challenge, and the one many fail to achieve.