Sensata Technologies, a $3Billion New York Stock Exchange-listed manufacturer of sensors, grew last year through several acquisitions which added over $750,000,000 in revenue. Hans Lidforss, senior vice president of strategy and M&A, explained his approach at a May 21st Boston breakfast meeting sponsored by the Association for Corporate Growth.
On the acquisition side, little was startling; they evaluate the usual parameters of risk and reward, price the target, look for interpersonal fit and possible synergistic savings. What was interesting, however, was the early focus on integrating the target into the acquiror.
The approach to integration begins prior to the time a deal is struck, let alone prior to the closing. An integration team is identified, and discusses the manner in which integration can proceed. Lindforss noted the commonly stated, but perhaps little-appreciated, fact that integrating a company is a lot harder than acquiring it.
Upon acquisition, Sensata designates both an operations chief and an integration chief, who must coordinate so that integration does not stifle operations, and vice-versa.
Notwithstanding the common wisdom that integration should proceed as quickly as possible, Lindforss spoke in favor of a more deliberate and deal-sensitive process. For the initial period, they look to get a better understanding of their acquired target, lest they inadvertently destroy some value they have just purchased. His full integration timeline runs not less than a year and, depending on circumstance, may run longer.
It was unusual to hear an M&A chief, applying the usual granular checklists for vetting a deal, contemporaneously applying the same kind of process rigor to understanding integration.
Perhaps failure to be as rigorous on integration as on the M&A side is why there is so much acquiror disappointment in the cold dawn after the closing dinner. . . .