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Despite the fanfare that usually accompanies takeovers, the reality is this 80% no to achieve the intended goals.
After all, a lot can go flawed. Inadequate due diligence. Revaluation. Poor planning and implementation of integration. Failure to retain employees in the latest company.
Yet firms spend greater than that $2 trillion on acquisitions per yr. Why? It is often unrealistic for a company to build all the things needed to achieve strategic goals quickly enough to remain competitive. However, the acquisition creates an opportunity to quickly expand the business ecosystem, leveraging latest relationships, distribution channels, products and innovations.
I’m driving entertainment technology company — made up of iconic brands like TiVo and DTS — that has grown our ecosystem with 15 acquisitions in the last decade alone. What did this experience teach me?
The success of an acquisition is greater than just the nuts and bolts of the deal itself; you do not just buy a technology, product or service to add to your company’s offering. You also gain institutional knowledge and bring on board leaders who may help lead your company.
I imagine that one of the most vital features of acquisition success is too often missed: people. Here’s what I learned about how they’ll play a key role in the pre-deal and post-deal process.
“Why” must include “who”
Of course, pre-deal due diligence includes assessing potential profits and acquisition risks. However, it also requires looking for leaders with the systems and cultures they have developed that are likely to contribute to the development of your company.
In dynamic industries like technology, firms often have to change stay competitive. This signifies that when evaluating future leaders, it’s best to ask the following query: Whose strategic considering, leadership skills and decision-making style do you wish to have on your side, even if which means taking them to latest areas in the future?
We saw how vital this consideration was during the early takeover. The technology we acquired eventually became obsolete, but this CEO remained a key member of our leadership for over a decade, and under his leadership, the acquired team developed into the foundation of one the most fun arms our business: our automotive platform with Internet access.
Once you have found a company with the resources and individuals who are likely to profit your company, and the terms allow for a reasonable valuation, it’s essential to develop an integration plan before closing the deal.
We achieve this through identification change champions – Engaged leaders who communicate well, are open to feedback, flexible, resilient and collaborate – each firms to unite our people. We then create detailed checklists for the first yr or more, often containing 1000’s of items, from job assignments to implementation of training events, all to quickly achieve our goals of a fully integrated team and business assets.
Use this as an opportunity to rethink culture
Many people see an acquisition as an opportunity to innovate – adding and developing products and developing strategies for latest markets. However, they often overlook one thing: the opportunity to innovate the company culture. Specifically, to take the best of each business actions to establish a latest normal.
Often the default assumption is that the culture of the acquiring company will remain dominant. But sometimes it might be a mistake.
Many times, combining two firms and combining their resources and operations creates an entirely latest company that may profit from: cultural change.
For example, after the merger, we realized that our previous corporate values now not accurately reflected the latest company. So we reset them. It wasn’t all the time easy: it required a long-term project in which employees were involved. It also required objectivity at the leadership level to remain open to latest ways of working and communicating. However, the initiative has resulted in a set of values that more meaningfully illustrate our evolving mission and culture and guide us on the path to greater success.
Move as quickly and clearly as possible
For those overseeing it, closing a deal can feel like crossing the finish line. But when you look over your shoulder, you may see that almost all of the employees are just getting in line at the starting. The real marathon begins after the deal closes: it takes constant work to get the rest of the company across the finish line and reap the expected advantages from the deal.
We have found that approaching the integration process with urgency, sensitivity and transparency is key to retaining as many employees as possible, along with the key institutional knowledge and skills they possess.
This means we work quickly to communicate our plan openly and truthfully. For example, inside 45 days of a recent acquisition, we were able to physically onboard leaders before 80% of the team. This approach goals to alleviate uncertainty by laying out plans and providing clarity about roles and opportunities. Tests shows that transparency can engender trust, so when the answer to a query is “We don’t know yet,” leaders must be upfront about it first.
We also expressed empathy. Recognizing that it is natural feel anxious about uncertainty and change is vital for building morale during the transition period.
ABOUT third employees of the acquired company normally leave inside the first yr due to uncertainty or cultural conflicts. However, we have seen time and time again that a thoughtful process has helped correct this trend. While it is not all the time possible to retain all employees, voluntary turnover in the yr since our last two acquisitions has been just 15%.
The definition of success
A successful acquisition will be defined in many ways: achieving financial goals, expanding relationships, or gaining latest markets. We saw it with our own eyes. For example, strategic acquisitions have allowed our company to significantly expand our global footprint in streaming devices and open up latest monetization opportunities.
Although these elements are extremely vital, we glance at success much more broadly. It also signifies that our team feels that they are always working towards achieving a worthy goal. Viewing people as critical to the success of an acquisition helped us build a team prepared and motivated to do just that: deliver revolutionary and extraordinary experiences to our clients.