Friday, June 17, 2011

Preparing for an Acquisition

I'm a big advocate of acquisitions as a means of business growth. But it really depends on your industry, background, interests, goals, and strategy. Growth via acquisitions is a strategy, just as pure organic growth is a strategy, growth through partnering is a strategy, and growth through licensing is a strategy. If you do decide to acquire another compan, because it's part of your overall strategy or simply because an opportunity to do so came up that's so good you can't pass it up, you must not only know how to make sure it's a good deal financially for your firm, but you must also ensure that it's a good deal financially for your firm. What's the difference? The first is doing the front end analysis on the company - running the numbers, assessing the industry and competition, and confirming the infrastructure behind those numbers. The second is integrating the acquired company with your company's management team, culture, infrastructure, and strategy. When you don't begin the integration from the day after the deal closes, you increase the probability that you won't come close to realizing the financial bump you expected. How do you go about fully integrating the acquired company? Craft an acquisition integration plan to help you answer this question yourself.

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According to the Inc. article, Prepping Your Team for An Acquisition, ' "Integrating an acquired business is always a challenge, and poor integration is the leading factor for a failed acquisition," says Neil Shroff, managing director of Orion Capital Group in Menlo Park, California...'

'The key to successful integration, Shroff says, is getting your management team involved in planning properly for what happens after the deal is closed. In other words, buyers tend to get stuck thinking about how to close the deal rather than thinking ahead in terms of how they plan to integrate their new acquisition so that it can deliver on all the spreadsheet promises. Waiting makes sense at one level because many buyers want to wait until the deal closes and "the ink is dry," says Shroff, before they spend the time and social capital involved in completing the merger. But waiting too long can spell disaster...'

In addition to your regular business plan, you must create an acquisition integration plan. This acquisition integration plan will include steps such as when and how to notify staff (incoming and existing), an ongoing communication plan, a software switching and/or integration plan (the bigger the companies, the less likely they use the same software for their various functions),.. The earlier you involve the whole management team in the process of integrating the acquired company, the better. As I've stated repeatedly, people like to feel they are a part of the process. When they do, they embrace the process and its outcomes. When they do not feel they are a part of the process, they offer up a lot of resistance. Think about yourself. Don't you do the same thing?

 



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