Acquisitions have been a historic avenue many companies have turned to in order to spur growth and seemingly create shareholder value. This growth avenue often gets a bad rap as companies are unable to make these acquisitions accretive, with numerous studies showing that as many as 70% – 90% of acquisitions are deemed as failure[1], ultimately leading to disappointment for all parties involved (except potentially the investment bankers).

One of the reasons acquisitions are often unsuccessful is the lack of upfront planning and executives’ reluctance to follow a robust process with sufficient thought and planning upfront. Having engaged with numerous businesses in developing their acquisitive strategy, I will delve into some of the fundamental insights we have identified to develop a successful and robust acquisitive process.

1. Ensure there is alignment with the business's overarching strategy

Ensure Seamless Integration with Business Objectives

An acquisitive strategy should not stand alone but seamlessly integrate into the broader narrative of the business’s growth trajectory. While the allure of rapid inorganic growth is tempting, a holistic evaluation within the larger business context is imperative. Whether expanding product portfolios, fortifying services, capturing market share, venturing into new markets, or safeguarding against potential threats—each move should be in harmony with overarching business goals.

In essence, strategic alignment serves as the indispensable starting point for crafting a robust acquisitive strategy.

2. Ensure alignment between all key decision-makers upfront

Securing consensus among key stakeholders

Beyond integrating acquisitions into the growth narrative, it is crucial to garner upfront alignment from key decision-makers. This proactive approach minimises surprises during live transactions, preventing costly delays after investing substantial time and resources.

An effective strategy involves an iterative and collaborative process. By obtaining buy-in and approval early on, all stakeholders operate from the same playbook, fostering a smoother transaction process from inception to completion.

We recommend establishing clear communication channels and protocols for ongoing collaboration. Regular check-ins and transparent updates maintain alignment and create an environment where potential concerns or adjustments can be addressed promptly, reducing the likelihood of misunderstandings later in the process.

3. Carve out dedicated strategic thinking time

Allocate Time for Deliberate Process Development

Developing an acquisitive strategy is not an overnight endeavour; it demands dedicated time and patience. While this might not be the news a pressured executive wants to hear with shareholders closely watching, a well-planned and thought-out process is essential. Those spearheading the strategy need an in-depth understanding of the end-to-end process.

Businesses should consider leveraging the expertise of independent advisors to navigate the complexities presented by the process. Their insights into the transaction process can prove invaluable, serving as an extension of the internal corporate development team. To foster collaboration, it is crucial that advisors seamlessly integrate into the team, ensuring a shared responsibility and a more robust strategy.

4. Establish a robust, repeatable framework

Establish the framework for future success

Developing an acquisitive strategy necessitates a forward-thinking approach. It’s crucial to understand that the strategy and framework created are not isolated instances but part of an ongoing, repeatable process. The goal is to craft a robust and defensible approach that becomes integral to the business’s journey through multiple acquisitions.

This mindset ensures a smoother experience as the process unfolds. Upon reaching decision points, the evidence of a defendable decision-making process becomes apparent to relevant governance structures. The inclusion of rigorous elements in the framework removes a substantial component of friction in the overall process.

Consistency in the developed process and key considerations provides comfort and familiarity to governance structures, streamlining decision-making. The key takeaway is to envision this strategy as a versatile tool for numerous acquisitions, not a one-time solution.

5. Plan for strategic integration

Anticipate Integration Considerations Early

While many transactions successfully cross the finish line, the success of integration remains elusive for a significant number of these ‘successful transactions’. A key factor contributing to this challenge is often the lack of upfront planning regarding integration.

Early in the potential acquisition phase and during the development of an acquisitive strategy, a pivotal decision revolves around whether the acquisition will assimilate into existing operations or function as a standalone entity. With its distinct decision-making framework, this decision is a critical component of acquisitive strategy development, influencing the evaluation of potential targets.

The choice between integration and maintaining standalone status necessitates thorough consideration, impacting the overall decision-making process. Acknowledging and addressing integration factors at the strategy formulation stage significantly enhances the likelihood of successful post-acquisition integration.

Crafting a successful acquisitive strategy demands a holistic approach, integrating strategic foresight, stakeholder alignment, time dedication, robust processes, and early integration planning. The synergy of these key considerations forms the foundation for navigating the complexities of mergers and acquisitions (M&A). By adopting a mindset of continuous improvement and repeatable success, businesses position themselves to achieve successful transactions and seamlessly integrate them into their long-term growth narrative. In the dynamic landscape of M&A, this strategic foresight and meticulous planning pave the way for not only M&A transactions but for enduring success in an ever-evolving business environment.

At Step Advisory, our team combines a wealth of expertise in growth strategy and transaction advisory. Navigating the intricate landscape of mergers and acquisitions requires a strategic vision and a nuanced understanding of the transactional intricacies. We stand ready to be your trusted advisors, offering insights honed through experience to guide you seamlessly through the process of developing a successful M&A strategy tailored to your business needs. From aligning with overarching goals to securing stakeholder buy-in, allocating dedicated thinking time, establishing repeatable frameworks, and anticipating integration considerations, our collaborative approach ensures that your M&A journey is not just a transaction but a strategic leap toward enduring success. With Step Advisory, transcend the complexities of M&A and embark on a transformative journey with confidence.

References:

Harvard Business Review. (2020, March). Don’t Make This Common M&A Mistake. Harvard Business Review. https://hbr.org/2020/03/dont-make-this-common-ma-mistake

Jacques Tredoux

Author Jacques Tredoux

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