Andy Wright: The importance of getting acquisitions right

Andy Wright, Executive Chair of Vital Power Group

Acquiring and integrating other organisations successfully isn’t an easy thing to do, so why do so many organisations choose this as the route to deliver growth for their shareholders?

Well, buying an established revenue and profit stream seems to make sense, and can seem like an easier solution than working out how to grow your business organically. It can also accelerate growth, as once the new business is bolted on, the revenues and profits appear in your accounts immediately and going forward, but only if you can keep all of them.

This provides day-one growth and some opportunity to take future synergies, either revenue or cost based, to further bolster profits.

Entering new markets or geographies is often also achieved via acquisition as specific skills and knowledge is often considered to be easier to buy in than nurture.

So, there are numerous good reasons to acquire, but how can you integrate the new business so that you can retain all of the value that you thought you were buying?

Successful acquisition integration

In my experience, a large part of the successful integration happens before the business is even acquired. There are a number of things that you need to do as part of the process of acquisition that will ensure a smoother transition for the new business.

Firstly, and very importantly, there needs to be an obvious “cultural fit” between your business and the business that you are buying.

This means that it will be easier to integrate if both leaderships have a joint vision of the opportunities that exist and how these might be jointly addressed and how the joint synergies of both organisations are better then each business trying to do it alone.

Secondly, the building of trust between both sets of leaders/owners is critical. Part of building trust is in getting to know each other better and not just in a business sense.

Patience is often key as it can take many meetings in a business setting and over dinner to get to the point that both sides can see the benefit of joining up. Trust is also built up by adopting an honest approach to discussions.

For example, there will undoubtedly be a question around future branding, it’s always an issue, so far better to deal with this up front and if you intend to change the name in the future then be honest about it. Doing this after the event will damage trust and as this particular area is highly emotive for owners, any negative repercussions can be significant.

Effective communication

Once the business is acquired, it’s crucial that members of the new team meet someone from the acquiring company on day one, setting out what this change means for everyone. This can be done as a group of people but there should also be time for one-on-one discussions where this is needed. Each group needs to be allocated an experienced member of the acquiring team, so that they know where to go if they have queries in the short term.

Communication in the early stages is critical as everyone wants to feel important, wanted and not isolated. Painting a picture of the future direction of the business and where they fit in is a powerful tool in establishing the psychological contract that is necessary to build long term commitment from everyone.

As is inclusion. Look for ways to include as many members of the new team in broader business projects as possible, allowing them to get to know other people and build a network of key contacts. Consult with them on major changes that are planned.

Generally, the acquiring business will be looking to “get control” of the new business, and often, this will mean that the acquired organisation will need to take on a new IT system very early in the process so that the new owner has visibility of rental assets, etc.

It’s often helpful to establish a steering committee populated by key people from both teams to manage the integration of the businesses as well as having people from both businesses involved in managing the integration of each functional area, such as HR, Health and Safety and Finance to name but a few.

Ultimately, most of this will come down to the trust that exists between both parties and the best way to create this, post deal, is to ensure that your words and actions always match.

I’ve done numerous acquisitions in my career, as well as the integration of twenty four separate, existing brands during the birth of Sunbelt Rentals in the UK and these few golden rules have served me well in all of these situations. Hopefully, you will find them useful, also.