You’re acquiring businesses. Many of them. Perhaps one every year, or even every few months. Congratulations: You have now joined the celebrated club of ‘serial acquirers’.
But are you a successful serial acquirer? Your ability to buy can easily begin to outpace your ability to own or digest.
Perhaps you’ve made it work so far by partnering with an outside group to help you plan and deliver integration, allowing the value creation engine to continue or even accelerate without undue disruption to day-to-day business. But continuing to rely on external help can be expensive, especially when ‘once in a while’ becomes ‘the new normal’. In some cases, you may also decide to turn acquisition – and integration – into a core capability within your organisation, perhaps even a strategic differentiator in the market.
But where to start? Most start with the most obvious: building playbooks, checklists, tools and templates. Codifying key steps, building consistency, ensuring absolutely nothing is forgotten. Hiring a few good project managers. Unfortunately in many cases, that’s where it stops. The result – and we’ve seen it plenty of times – can be an expensive, ineffective internal team keeping very busy with their checklists, project plans and dashboard reports, yet still unable to help the business deliver deal value. Commercial leaders hire their own integration managers. So do functional groups. What you have is process, often lots of it. What you lack is traction.
High-performing M&A requires a delicate mix of process, experience and leadership behaviours[1]. Before diving into creation or assembly of process, or building your integration empire, here are a few things to consider:
- The single largest driver of integration (value creation) success – and failure – is accountability and governance. As a client once told me, “If your leaders are on board and know what they have to do, they’ll get it done without much in the way of tools or templates. If they’re not on board, no amount of process or project management will get you anywhere.” Are your business leaders clear on, and prepared to take ownership of, deal and integration objectives? What happens in your organisation if targets such as these aren’t met?
- Future success is not achieved by codifying and scaling the past. Capturing the learnings from past deals is of course a good thing. Building a process and templates to allow you to do the same kinds of deals more quickly and consistently can also be a good thing…provided this is what you intend to do in the future. And most organisations don’t, at least not entirely. The same goes for your team structures, skills, governance – the lot. We worked with one client some years ago who ask for our help to ‘industrialise their M&A and integration process’, largely to support accelerated M&A activity. They gained an ability to ride 10 bicycles at once. They didn’t learn how to drive a car. Building or scaling your current approach can help you do more deals. But don’t be fooled: it’s unlikely to help you do larger, more complex deals without outside help.
- Even more so than M&A, integration is an experienced-based discipline, not a skills-based one. Another favourite quote of mine from the Head of Integration at a prominent Big Pharma client: “The most dangerous person to run an integration is someone who’s done it once.” Every deal is different – if only because your own organisation has changed since the last one – so the more determined groups are to stick to the process as designed, the more likely it is eventually to go off the rails. Many organisations are now reinventing their playbooks to focus on experience, not process steps. How are you capturing and intelligently applying the experience your business has gained from previous deals?
- Integration is much more than a complex project. So are good Integration Managers. A solid grounding in project management skills is without doubt helpful, but integration managers need to be so much more. Able to hold their own in any conversation commercial, financial, operational, technical. Agile and creative. Excellent at connecting the dots. Pragmatic. Organisationally aware. Natural facilitators and relationship builders. Unparalleled influencing skills at senior management levels. While it’s an understandable starting point for your resourcing search, many – arguably most – traditional project managers are simply not right for this role, and never will be, regardless of how much training or support you give them.
- Individual competency is not the same as individual ability. In fact there are four components needed to ensure someone in an integration role can succeed:
- Competency: Does she know how to do the job?
- Incentive: Does she actually want to do the job, and do it well?
- Accountability: Does she have the authority to do the job?
- Influence: Does she have permission from her stakeholders to do the job?
Guidelines, tools, templates and systems are great – really! – but none of these will help with any of these beyond the first.
- …and individual ability is not the same as organisational capability. Whether your turnover is £30m or £30bn, internal integration groups must consider the community of expertise and resource across the business needed to deliver high-performing M&A. Alongside any central integration team, this community invariably includes:
- The M&A or Corporate Development team (accountable for doing the right deal at the right time under the best terms)
- Commercial and Operational teams (accountable for delivering deal benefits alongside BAU)
- Functional groups such as HR, IT, Procurement and Finance (accountable for supporting benefit delivery at minimum cost and business disruption)
Without careful alignment and orchestration across all of these groups – well before any deal is on the horizon – your plans for successful integration will never become a reality. Do all of these teams share the same processes, experiences and behaviours as you? Are they ready, willing and able to work together on your next deal?
As we’ve highlighted elsewhere[2], moving from an average to a high-performing integration typically releases about 2% of the target company’s annual revenue. 2% may not sound like a lot, but think again: that’s in the order of £2m on a £100m acquisition. And that’s assuming your only trying to get from ‘good’ to ‘great’. If your average isn’t really all that average, the money left on the table can be up to 4-5 that amount. Capturing value from M&A requires specialist skills and experience, and many organisations – most in our experience – need some outside help to realise the full potential of their deal. However, minimising the need for outside help is a perfectly reasonable goal (provided it’s not at the expense of value creation), and if your aim is to do so by building your own internal capability, the above considerations will help you get off to the right start.
BTD is hosting a free virtual round table on this topic at 3pm UK time on Wednesday, May 22nd. Click here to register your interest.
[1] Inconvenient Truths; Beyond the Deal, 2018
[2] Good integration delivers real M&A value... Or does it? - BTD Consulting
