Key Tips You Should Be Knowing About Successful Acquisition

If you are thinking every feature and the process remains the same when it comes to an acquisition, then you are wrong. But, the principle remains the same where two organizations/companies, having different owners, join hands to function together in order to achieve a common goal. There is no doubt that with an abundance of deal structures and the whole process of valuation, of a target company, being arduous, acquiring a business is more of an art as compared to science.

Seeing the current environment, it has become quite difficult to increase revenues when the economy is moving at a snail’s pace. But, the moment you have successfully built a stable base, seek different methods to grow your business and “acquisition” is one of the best ways to do it. There are also instances where the main concentration is towards buying the customers and in others; the concentration is towards purchasing either the technology or the product. Some of the leading acquisitions are – AOL taking over TechCrunch, Symbian being acquired by Nokia, and inBev taking control of Anheuser-Busch.

Like we discussed earlier, no two deals are alike, let us get to know some of the key components that help in having a successful acquisition –

  1. Getting The Team Together

Your first step should be to frame a working team that will comprise of representatives from marketing, operations, sales, and finance. The inclusion of experienced advisors like investment bankers, lawyers, insurance experts, and accountants can come handy. There has to be a cohesive effort in order to acquire a company/organization and having continuous communication with your team members is also of great significance. The main advisor to the acquisition team should be the CEO or someone appointed by the CEO who is proficient enough to distribute the roles and responsibilities amongst the team members.

  1. Launching A Target Search

The team will be the decision maker whether the investment banker should be given the authority of evaluating the targets. It will be the investment banker who will enjoy all the rights to access the key resources and offer his consent on negotiation and valuation. In the case where the target company is not for sale, the team’s senior member should approach the owner of the company along with a compelling offer suggesting why it would be beneficial to join hands.

  1. Framing A Foolproof Plan

There are various questions that come under having an effective plan for an acquisition. These questions are – what are the reasons behind doing this? What are the specific objectives? Whom are you targeting? What will be the financing options for the deal? The acquisition plan will comprise of related industry trends, objectives, ways to create the deal flow, and having a set time for the completion of the deal.

  1. Setting Pricing For The Deal

You cannot be sure as for how much worthy the business actually is with the help of one valuation method. Out of so many methods, market value is one of the indicators that really prove handy. But along with this, make sure you consider meaning, strategic value and the projected earnings. Having a look at the assets such as customer lists, licenses, brands, and intellectual property will also be of great help. It is certain that you want to make a purchase at an affordable price.

It is imperative that you have taken extra pain in understanding the financial aspect of the business that you have plans to acquire. Make sure that you have studied the culture of the target company so that it can easily mesh with your company’s culture. The experts are of the view that the key reason behind the failure of the acquisitions is when the culture of the buyer doesn’t go hand in hand with the seller’s culture.

  1. Funding The Acquisition

Considering the fact that every deal has its own character, the structure tends to vary with multiple options for financing the deal. Overall the elements that do influence the structure are conditions of the purchase price, market scenario, complexity and the size of the transaction, and fiscal position of the buyer.

In the case of larger deals, the public markets are easily accessible whether it is going to the public debt market or offering public stock. Actually, it is the smaller deals that have to face the music, especially the ones that are below $50 million. If you have plans of closing smaller transactions or perhaps you are a small company, you will have to face tough time to secure bank financing.

  1. Having Experienced Staff

It is very important that you have a team having vast experience and proficiencies to assess a transaction, complete an investment, make predictions of its performance and tackle any issues that might influence the results. They should be having all the qualities required to envision the challenges that they might face during integrating the transaction and forming a company.

  1. Goals and Success Factors Should Be Defined

It is imperative that you have analyzed both your future aims and competitive position while putting together your M&A strategy. That means that you should be knowing what you are actually doing with your business, what you want to achieve, and what are the things that you value the most. This means you don’t have any doubts regarding what you want to achieve through this transaction. You can do this by asking the following questions –

  • Are you looking to acquire new products, processes, and capital?
  • Do you have plans to raise the market share?
  • Maybe you are more focused to eliminate one of your competitors or achieving a vertical integration?
  1. Planning and Execution of Due Diligence

While evaluating a potential deal, there is a need to do more than just doing a simple math. When it is done efficiently, due diligence should test the strategic fit of the acquisition. You can start off by taking into consideration your objectives, related to the acquisition, along with the drivers of the valuation. When you know what you need to preserve will actually dictate what are the things that should be tested for in due diligence. Your overriding goal should be to evaluate the value that you are aiming for, is actually there. It comprises fiscal, legal, people, and technology due diligence.

  1. Creating a Transition Team

Strong and effective leadership is required to the key transitions as it sets the tone for both savings and efficiencies. Owing to this, it is imperative that a transition steering committee and a functional team is made. Ensure that these groups have top of the line managers and they are the ones who should collaborate with the leaders, from both sides of the acquisition. They should also have high aims and should carry out activities according to a well-set plan.

  1. Consider The Four C’s

In order to ensure that your M&A transaction meet all the goals and objectives that you have desired, make sure you give the following four C’s –

  • Care – It is your behavior and reaction towards, all the issues that will make the difference. There will be instances that even a small inconvenience can lead to the feeling of disappointment. So, make sure that you respond promptly and find a quick solution for it.
  • Compensate – If you want that your existing management should stay, make sure that you set achievable targets and they should also be compensated appropriately.
  • Cull – In the case, you have to say goodbye to any of the management member, it is important that you have taken your time to a make the final decision.
  • Communicate – Ensure that the people, on both sides of the transaction, are well aware of how to subdue the rumors.
  1. M&A as a Significant Change

The fact cannot be denied that M&A is a noticeable change, not only for the employees of the acquired company but also for all those employees who will play a vital role in managing and participating in the integration.

  1. Be Clear With The Bad News

If you have a bad news, make sure that you don’t hide it instead, it is important that you have revealed it. In the case, where you are not transparent, you will end up losing the trust of your management. For instance, if there are plans to shut off a facility and you want to lay off some of the employees, make a clear announcement. Laying off your employees have a great impact on the morale of the remaining employees.

  1. Culture Fit

Majority of the leaders are afraid of the word ‘C’ as according to them it is too soft and squishy. But, the culture can be translated into measures, strategy, operating norms, and objectives. This translation has a great significance when we talk about the success of M&A, and it starts with leadership. Make sure that you have taken your time to define the acquired company about your corporate culture. It should not confine to the policies only but you should also ensure that they are being told about the unwritten rules that have great importance for having a planning, gaining influence and budgeting.

  1. Developing a Habit of Experimenting and Testing Strategies

It is commonly recommended that the retail companies tend to experiment and carry out testing of varied techniques and try to learn from those experiences in order to formulate their strategies. Seeing it theoretically, testing different acquisition methods is not that difficult as most of the people think they are. It is mainly a presentation of the prospects of the varied marketing messages to make out which one will have rewarding response rates. Using ‘Champion and Challenger’ process will actually prove beneficial in making out which approach/message is better.

  1. Having Meetings

Don’t overlook the significance of having meetings at regular intervals. These meetings should be done in order to review the progress and what changes can be made in the plans. Ideally meeting, with the integration plan owners, should take place weekly and in some cases daily. Such meetings should concentrate on having a measurable success and discussing what will the future steps.

  1. Consider The Human Element

Acquisitions are more than just fiscal figures. It is imperative that you have developed a healthy relationship with the owners, mainly in privately-held,  not-for-sale acquisitions. Most of the times, it is quite difficult to convince the owners by just offering them a fat paycheck. Having knowledge about the motivations and the drivers of the owner will surely come handy. Know more about what are the things that really matters to them. If you are able to develop a successful relationship with the owner early on, it will surely come beneficial when it comes to negotiations and diligence.

  1. Knowing The Significance of Early Wins

If there are stakeholders involved, then every merger and acquisition is not less than an emotional process. Investors, employees, suppliers and customers, they all will be eagerly waiting for the signs of failure or success. Make sure that you have given utmost importance to creating early wins and communicating them extensively.

  1. Know That Practice Makes a Man Perfect

Just like any important skill, M&A integration can also be perfected with the help of continuous practice. If your company has successfully performed many acquisitions, in the past, make sure that you have made the most of the knowledge & experience that you have gained from those integrations. It has been found that majority of the companies don’t make frequent acquisitions and there will be little opportunities to develop your integration proficiencies.

Acquisitions have always meant to increase value and lead to the creation of sustainable competitive advantage for the companies/organizations. Merger and Acquisition is also a good time for both the employers and employees. New and better growth opportunities are created that helps in future growth and success. The compensation managers and the decisions made by them bear great significance in achieving that success. So, if you are eying an acquisition then the above-discussed points will surely help you in having a successful acquisition.

Author Bio: Sophia is a writer by profession. She has a knack for coming up with novel ideas. She currently writes for investmentbank. She contributes ideas for latest technology and many more. She has also worked for scores of magazines, writing exciting content on various topics.

Author: Guest

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