post-merger

Mistake #3: To forget about the customers

Seven Mistakes that will ruin your Acquisition

Mistake #3 - To Forget about the Customer

The “All Customers are the Same” Syndrome

Many acquisitions are made to capture a certain segment of the market or a new market that, would otherwise take too long to reach organically.  These types of transactions sometimes aim at spaces that are not directly related or connected to the acquiring company’s space or area of expertise. And for that very reason must be thoroughly analyzed from several angles to ensure that the new market can be served as well or better than before, and that the new owners will have analyzed strategically the synergies with the existing business. Maintaining the customer base (and the revenues from that base) while working on the other aspects of the strategy, is critical to the success of the transaction, however, the percentage of success is not always high. Business models differences, sales channels, customer support structures, pricing and payment terms, lead times, and innovation expectations are just some of the factors that may influence the rate of success. If these factors are not fully understood beforehand, or are ignored, failure is inevitable.

Recent Posts

MISTAKE #2: To buy the wrong company

Seven Mistakes that will ruin your Acquisition

Mistake #2: To buy the wrong company

The “This ir Our Best Option” Syndrome

Sometimes you will not have much of a choice of ideal acquisition targets. It is possible that the poll is limited due to the specific requirements you have for the right company, or perhaps you want to play in a competitive space (not recommended) where several other buyers are bidding for the same targets. Other times, the list may be longer and there will be more options and less urge to move forward. In any case, it is imperative to acquire the right company, as the consequences from a wrong choice are almost always beyond repair, and many times you will see that a wrongly acquired company will be sold after a few years of repeatedly trying to make it work.

Several facts lead to purchasing the wrong company, such as the lack of a thorough and accurate understanding of the business being acquired, overestimating the value, staring with the wrong acquisition strategy, conducting insufficient due diligence and list goes on. For example, making an acquisition to enter a new market, for which the acquiring company is not well prepared versus an expansion to an adjacent space which is much better understood and where the sales channels can be effective could be the deciding factor for failure or success. Some may argue that the due diligence should bring to light all the facts and details about the target, but the reality is that the confidence in the due diligence during an acquisition is overrated.

Recent Posts

MISTAKE #1: “To believe that the acquisition will fix the current problems of the company”

Seven Mistakes that will ruin your Acquisition

Mistake #1: “To believe that the acquisition will fix the current problems of the company”

The “Fix by acquisition Syndrome”

This type of mistake is typical of organizations that believe that buying a company with a great product, or technology for example, will resolve their poor innovation and low product vitality issues. If the problem is that the company lacks a culture of innovation, has inward looking product management and engineering organizations, and the sales force struggles to adopt and sell new technologies and business models, then the result of the acquisition will be more like pouring salt over an open wound. In one of my personal experiences of an actual acquisition, the VP of Engineering left because he disagreed with most of the reasons why the acquisition was being done. He objected the R&D synergies proposed in the integration plan and was ready to reject the product roadmap based on the new product offered by the company to be acquired. According to his words, the new product, its technology, and its features “did not represent who we were”. What this VP did not realize was that “who we were until then” was not creating the innovative solutions that our customers needed to resolve their needs and problems, and that for that reason we were losing market share, as well as our long-time reputation as innovators. This sounds surreal, but it is true. The acquisition is an enhancement or an expansion to the company, not a band-aid.

Recent Posts

Seven Mistakes that will ruin your acquisition – Intro (based on true stories)

Seven Mistakes that will ruin your Acquisition - intro

(based on true stories)

Mergers and Acquisitions (M&A) has been and still is, the growth and diversification strategy by excellence every time a company has decided to accelerate their access to a new market, a product, technology, know-how, or even “feet on the street” as opposed to adopting an “organic” strategy.

Many companies count with their own specialized M&A organizations, which focus on the identification, assessment, valuation, negotiation, due diligence and closing of their mergers and acquisitions.

Significant resources are dedicated to the execution of an acquisition. Typically, it all starts with a solid Strategic Plan that will have identified an acquisition as the right thing to do to achieve a certain strategic goal. The target companies are selected following a set of specific criteria that will point to the best acquisition candidates. Then a rigorous process is followed till the acquisition closes.

Given the amount of planning, resources, analysis, assessment and reassessments, due diligence, synergies stress testing, board reviews, and integration plans, one would think that the probabilities of success for any given acquisition would be higher, at least proportionate to the time, effort, talent and money invested in the operation. Now, assuming that the Harvard Business Review report is accurate, between 70 to 90 percent of acquisitions fail.  So, how come so many of these transactions, which were so thoroughly planned, analyzed, scrutinized, critiqued, vetted by analysts, and consultants, then approved by the CEO, and by the board of directors after further review, then fail? How is that even possible? Well, it is very possible. I have been part of great and not so great acquisitions myself, and I have learned firsthand what can make or break one of these. Through my years of experience, I have learned how to execute successful acquisitions that actually deliver value on the business case, and I have identified Seven Mistakes that buyers must avoid in order to prevent a failed operation. (more to come)

Recent Posts

Verified by MonsterInsights