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How to gain maximum value from an acquisition

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Post-traumatic stress is normally used to refer to a medical condition, but it could also be applied to the parties following a business transaction, in particular, an acquisition.

Research carried out by KPMG has demonstrated that the majority of transactions fail to add value to the acquirer.

Your initial reaction could be “well clearly the buyer paid too much” and without a doubt that won’t help a successful deal, but perhaps not surprisingly it’s not the value paid that causes the problem, but rather the cultural and integration issues that bring the greatest issues.

Most problems (and positives) in a business revolve around people, values and cultures. Ok so IT hitches are also pretty damming, but get the people integration wrong and it all goes south.

As a corporate financier I am rarely involved post completion of the actual deal but I am privy to the nightmares that can ensue if cultural integration hasn’t been considered.

So here is my check list to ensure your deal does add value to your organisation. (Assuming you have paid an appropriate consideration) Some of these may be less than welcome suggestions from the vendor, so you need to work towards a compromise.

  • Meet as many of the senior team as possible throughout the process;
  • Ask the open questions about communication processes and what issues they have with them, be that verbal written or IT;
  • Understand clearly who sees what and when in terms of data such as financial information;
  • Speak to HR and get their view on staff morale;
  • Look at the social side of the business, do they have events, what’s attendance like, look for the us and them stuff in terms of director and management involvement;
  • Assess the culture, is it blame and shame or a give and forgive – ask the people that will know; and
  • Check service records, what staff turnover is like.

As you are gathering this information, bench mark against your own position, perhaps you operate a need to know culture and it works for you, but if the target doesn’t work in that way, you will have an alienated work force before you start.

It’s even possible to work the other way round if your clutter is one of openness and sharing the good and the bad issues, to take that approach with a new company could terrify those involved particularly if you are sharing not so good news.

If this is an international deal, cross-border issues can cause real problems. Not least of all the difference in sense of humour which is often a much overlooked advantage in successful transactions.

The most important thing though is these matters should not be rushed, particularly if you have had only limited access to the people pre-deal. 

Spend time getting to know the people; the systems will follow, although my speed is always break neck! In a post transaction integration it’s better to take your time to get it right and then you will have more chance of it staying right.

Jo Haigh is a partner at FDS Corporate Finance and author of ‘The Keys to the Boardroom, How to get There, How to Stay There’, which is released in January.

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