Russell Logan, founder and Executive Director of Freeman Logan, a M&A advisor, and Post-acquisition Integration Secretary-General of ARFA (Association of Corporate Mergers & Acquisitions Managers).
In increasingly competitive and internationalized markets, external growth remains one of the preferred strategic development methods for companies. It is also a formidable accelerator, faster and more ambitious than organic growth. However, it takes on an eminently complex character, particularly in its human, organizational and cultural dimensions, even more so when it comes to an international operation.
In terms of acquisition, the most difficult thing is not to buy, but to integrate. And failure or disappointment in the face of the expected synergies is unfortunately often present… In increasingly competitive and internationalized markets, external growth remains one of the preferred strategic development methods for companies. It is also a formidable accelerator, faster and more ambitious than organic growth. However, it takes on an eminently complex character, particularly in its human, organizational and cultural dimensions, even more so when it comes to an international operation.
The different modes of acquisition
The vertical approach consists of controlling the entire value chain upstream or downstream. It thus makes it possible to consolidate its business model through the acquisition of companies whose businesses are complementary.
The horizontal approach amounts to acquiring a target in the same sector of activity to gain critical size on the market. The third type of acquisition, the concentric approach follows a logic of “connected” diversification to take advantage of synergies, for example at the technological, commercial, or support function levels. the vertical approach consists of controlling the entire value chain upstream or downstream. It thus makes it possible to consolidate its business model through the acquisition of companies whose businesses are complementary.
The three possible integration modes
In the context of an acquisition, there are three possible integration methods. In the first case, the target company remains a separate entity from the company that acquires it. This mode is suitable for example when you want to keep a brand or position yourself on a specific market. In the second case, the target M&A advisory firm is integrated via rationalization processes aimed at eventual absorption. Finally, the last mode of integration, by “symbiosis”, consists in sharing a project in a more cooperative rather than integrative approach.
Pitfalls to avoid for a successful integration
However, despite the precautions that are taken, more than one out of two m & services fail insofar as the expected objectives are not achieved. With hindsight, some managers believe that they should have taken the time to reflect and better prepare for the integration phase, by carrying out more precise audits to identify the key issues very clearly and not be satisfied with a simple financial package. However, in their enthusiasm, they may tend to minimize or conceal certain difficulties.
If it were to be done again, these decision-makers would reflect from the outset on the synergies to be developed as a priority as well as on the target organization to be put in place. They would also pay much more attention to the human and cultural aspects, ensure the satisfaction of both parties, and seek the support of the management of the two entities.
As a result, business leaders would be much more involved in the organizational, social, human, and religious dimensions from the perspective of integration. despite the precautions that are taken, more than one out of two m & services fail insofar as the expected objectives are not achieved. With hindsight, some managers believe that they should have taken the time to reflect and better prepare for the integration phase, by
The keys to success
Conducting in-depth audits to understand the target as precisely as possible is essential. As soon as it is signed, a coordinated and rhythmic action plan should be put in place to quickly embark on a common objective and control potential risks.
– planning and steering via an ad hoc committee.
– the pace of transformation via a calendar.
– change management through human support.
– strategic implementation.
– construction of the target by aligning organizations.
– process convergence.
It is a question of executing the plan with rigor while respecting the timing, but while remaining flexible and open.
Consolidate, develop, and federate
Change management in project mode and a support strategy where people are at the center are based on several fundamentals.
It is thus a question of apprehending and immediately accepting human complexity in all its dimensions, emotional, to deploy the tools of change management (operational relays, interface teams, the mix of teams, joint actions, seminars, workshops, etc.).
The success of the operation depends on the strong involvement of top management and all employees. To maintain the motivation of employees, it is particularly necessary to establish a direct link between the incentive plan and the creation of value.
It is also important to take the time to understand the culture of the target company. And to measure the cultural gaps between the two entities. This step will then make it possible to converge corporate cultures towards common managerial and HR practices.
Clearly, it is essential to focus more on shared future growth rather than cost optimization. It is indeed a question of privileging integration via the levers of value creation. And not in a traditional way around the functions.
The success of the operation depends on the strong involvement of top management and all employees. To maintain the motivation of employees. It is particularly necessary to establish a direct link between the incentive plan and the creation of value.
A “straightforward” and proactive communication
To gain the adhesion and the support of all the actors concerned. In this sense. The prior establishment of a map of the key players in the ecosystem is likely to. Provide clear answers on the strategy. Human, and organizational issues.
In conclusion, despite everything, in the last instance, the integration destroys value to the point of jeopardizing the new entity. To do this, it will be necessary to ensure careful monitoring of the achievement of the expected synergies.
It is essential to focus more on shared future growth rather than cost optimization. It is indeed a question of privileging integration via the levers of value creation. And not in a traditional way around the functions.
