Buyer Beware

Navigating a Successful Acquisition

Acquisitions can be very attractive. They make great PR and signal the purchasing company’s strength, growth and longevity. A 2019 PricewaterhouseCoopers study on M&A trends* , however, issues a word of caution - 53% of acquisitions underperform their industry peers, on average, in the 24 months following completion of the deal. How do you ensure your company’s acquisition does not become another ‘cat in bag’, as we say in local parlance?

Certainly, carrying out due diligence of the acquiring business, and managing expectations would be high on your checklist. Here are some of our other top recommendations for delivering an acquisition that would add long term value to your business:

Stay Focussed on Creating Value
Acquisition opportunities arise for any number of reasons. Perhaps you’re buying out the competition to strengthen your market position, or you believe the business’s resources and prospects - whether brand, technology or its people, can drive greater growth opportunities. Whatever the reason, stay focussed on the goal of increasing shareholder value. Ulterior motives are not uncommon – especially in environments where management bonuses or benefits are tied to portfolio size. Acquisitions also feed into egos and executives are sometimes inclined to pay more than the actual acquisition cost creating a situation where emotional and qualitative factors trump quantitative and valuation data. Keep a critical eye throughout the process and do not hesitate to question objectives if things seem to be moving off course.

Take a Big Picture View
The reality is that the owners or management of the company you are interested in acquiring know their business better than you do. Hiring an independent auditor or mediator is a must, but you and your team also need to know the industry and market inside-out. This is especially important when seeking to acquire a business in a foreign market where culture, language and local regulations differ from your own. In other words, approach the acquisition within its situational context and from a holistic viewpoint, which bring us to our next point.

Make Talent a Top Priority
The people within a business represent its greatest resource. Getting to know the teams within the acquired company should be high on your agenda from the very start. Following the acquisition, your people will need to work closely with those teams to ensure a seamless transition and minimise disruptions to staff and customers. Considerations should also be made for the staff within your own firm both during and after the process. They too will experience feelings of uncertainty. Developing an integration plan should be done at the onset, not as an after-thought.

Take a Long View with Integration
It is usually a given that when businesses merge there are redundancies and opportunities to streamline. Brands may be discarded, equipment sold off and plants or offices closed. The acquired business may have its own accounting, marketing and administration teams. How will these employees factor into the new structure post acquisition? If the business has unionised staff this will add another level of negotiations to the integration process and needs to be factored into the timeline. Plan both sensibly and sensitively, ensuring that communication is both timely and transparent.

There are many third-party providers that can ably support a business through an acquisition. Getting it right and ensuring its long-term success may be a complex undertaking, but being thorough, focussed and true to your company’s vision will redound the necessary benefits.

*Creating Value Beyond the Deal – What if you took a different perspective to your M&A – PWC / Mergermarket; 2019