Every acquisition should be strategic

Buying a business ‘on the side’ will get similar sideline support; marginal at best, neglectful at worst. Consider the purchase in your long-term strategy to make it successful. By TOM McKASKILL.

By Tom McKaskill

Too often acquisitions fail to deliver a positive outcome because they are sidelined when more important aspects of the business need attention. 

An acquisition that is undertaken to drive revenue growth, but which is not core to the overall strategy of the business, has a much higher chance of failure than one that is fundamental to achieving the major growth objectives of the business.

If we are to be brutally honest, few acquisitions are going to proceed without some level of disruption to the acquired business as well as to the buyer’s operations. Most acquisitions generate high levels of uncertainty about the future. While we anticipate this in the vendor’s business, few corporations adequately consider this within their own organisation.

Vendor employees will be concerned about their job security, job descriptions, location, benefits, new reporting structures and even minor issues such as their right to a car space, whether they can still take a previously booked holiday and what biscuits they get with morning tea.

However, over at the acquired business, they may be wondering whether some of the newly acquired staff may take over their jobs or deny them anticipated promotion. These personal issues affect productivity, on-going external relationships and even people’s willingness to stay long enough to see the changes through.

Resignation rates at both the vendor business and the acquirer can be expected to dramatically increase in the periods immediately before and after an acquisition.

Such changes are disruptive, placing additional strain on remaining staff and creating knowledge gaps in organisational capability. Managers are then under pressure to change work duties, replace departing staff and manage stress points in those who remain.

If this situation wasn’t bad enough, now consider who is taking on the acquisition tasks.

Given the size and impact of an acquisition, few senior management will be untouched by the activities involved in evaluating the fit of a potential acquisition, the tasks of due diligence and then the subsequent management of intervention and integration activities. They need to undertake all this while they are also coping with staff needing individual support and managing resource changes and disruptions in their current organisations.

Little wonder then that most senior management will focus on shoring up their own activities before they will give full attention to those of the acquired business.

Basically, marginal acquisitions can be expected to get marginal support in a time of crisis. Unless success in the acquisition is critical to senior management achieving their own departmental objectives, you can expect problems at the acquired firm to take a long second place to problems closer to home.

Anticipating such a reaction can, however, greatly assist an acquisition strategy. It is clear that senior management resources need to be set aside during the acquisition process.

This can either be achieved through internal succession planning to ensure that current operations are well catered for or by acquiring new resources that can be dedicated to managing acquisition activities. Probably some combination of these two extremes works best in most instances.

What is very clear is that the success of an acquisition must be the principle objective of at least some senior executives, and that the more central to the core objectives the success of the acquisition is, the more likely it is to receive the attention it needs.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.