Three steps to acquiring a business the right way

When you’re a growing company with big plans, acquiring competitors or a complementary business makes sense. In one swoop, you can add scale, talent and a new customer base.

But with potential reward comes risk — an ill-considered acquisition can hold your company back instead of sending it soaring.

I’ve seen both sides of the coin, having helped guide many successful acquisitions and company integrations, but I’ve also seen horrible mistakes made: mismatched cultures pushed together, or not integrated at all; nasty surprises in the balance sheet, discovered too late; letting go the very people you need to keep, or keeping ones you don’t. The pitfalls are many, and sometimes only obvious in hindsight.

With plenty of experience to draw on, here’s a few key learnings I’ve picked up along the way.

Acquire right in three steps

1. Plan around people

   You’ll need a plan to integrate physical assets, infrastructure and finances, but people are your most important asset. They need to be front-and-centre in any merger between two entities.

   As the acquirer, you should immediately consider what happens to the founder or leadership of the other team — will they adopt your company vision and fit your culture? That vital decision will inform the entire integration effort.

   Make thorough assessments of key talent to look for clashes and duplications, but also synergies and skills that could open up new opportunities. Form a vision for how your joint team should be structured, and make sure everyone has a seat, a place on the organisation chart, and the resources and support they need.

2. Understand what you’re getting

   What’s the history and culture behind the team whose skills you’ve acquired, and what are their levers? How do they achieve the results that you’re basing your valuation on? Unpick what’s working and what’s not, and ask if anything you find can hurt you in the future.

   Has their growth been sustainable, or is it a house of cards? If they’ve acquired other companies in the past, how have they handled the integration, and are there any festering issues?

   Acquisitions present a potential Pandora’s box of issues that could come back to bite you down the track.

3. Create the space you need

   It’s never an exact science to find the right-sized physical space your merged entity will work from, because you can almost bet that within days of signing a lease on a new office, something will change — you’re already too big, or you’ve had to let go more people than you expected. You tend to try to firm up your plans as quickly as possible and make commercial decisions accordingly — no one wants to pay for things they don’t need.

   Something many try to do is to integrate teams as fast as possible, so that all the salespeople are sitting together, for example. You’ll get the best out of both teams as they share ideas, and quickly identify any cultural issues to fix. In saying that, the remote working environment has created some initial challenges around this, but it tends to smooth itself out as teams start to work together.

Yes, there are pitfalls for the unwary but I’m a firm believer that if you go into an acquisition with your eyes open, and commit to doing the diligence beforehand and the structural work afterwards, there’s a huge amount of upside to be gained.