Diligence is complete and your acquisition deal has been signed and closed. Your company has acquired its target. What do you do next? This was the second topic discussed by the panel at the NACD/New England M&A program held June 9th in Boston.
Even if your plan is ultimately to fully integrate the target into the acquiror, it may make some sense to take some time, understand what makes the target tick from the inside, and evaluate the depth and quality of the management team. Sometimes an acquisition is designed to bring more energetic technology or operational approaches to a larger and more staid company. Letting the target run by itself may allow it to retain its entrepreneurial culture. You have acquired not only technology, contracts and physical assets; you have acquired the human beings who have built the target enterprise into the company you have identified as providing strategic strength to your own company. Don’t crush those strengths immediately in a rush to obtain financial efficiency.
Part of the post-acquisition integration process is to create a joint vision, between acquiror and target management, of what the consolidated company should look like. Target management, including several levels down depending upon size of the target, should be made to feel that after the acquisition they have a place to reside, and a better path to achieve their own goals. To fail in this regard drives target management to the placement counsellors. (One anecdotal tidbit: shortly after Procter and Gamble acquired Gillette, 80% of the senior management team of Gillette headed for the hills. Likely not the very best result….
The panel agreed that no acquisition, no matter the quality of the diligence, will work exactly as anticipated. Often the synergies are interpersonal and indirect, and the acquiror has to focus on team building (even if the acquisition is of a prior competitor where initial instincts are non-collaborative).
Since culture is so hard to identify, one of the panelist said he liked to take the inquiry down one step to look at the “values” which create the culture. Are the two companies agreed that they are structured for the long term to build shareholder value and to help the customer base? Or is the culture of one company that it is a vehicle for individual success? Are decisions typically reached in each organization through a small number or a very large number of decisional tiers? Diligence beforehand had better have gotten these factors correct, or any integration will be rocky road.