Lesson 1: Failures are common with acquisitions
Before rushing into an acquisition it is important to be aware that not all acquisitions are successful – achieving the intended benefits may be the exception rather than the norm. There are many reasons behind this – from challenges with integrations to difficulties associated with integrating an acquired technology. While many managers think that they are the exception – the one good deal, set up to succeed where others have struggled – it is important to have a healthy dose of skepticism when considering acquiring another firm. The benefits are often overstated and the challenges downplayed.
Lesson 2: It is important to consider post-acquisition integration early
Another important stage in successful acquisitions is considering post-acquisition integration at an early stage. This is a stage that is often left until after the acquisition itself – by which point it is too late to discover that there are fundamental cultural clashes. Consideration of the integration approach at an early stage is important to devising your post-acquisition integration approach, and ensuring that the different parts of the business will be able to effectively work together.
Lesson 3: Employee turnover can derail the acquisition process
Another important lesson with acquisitions is that employee turnover can literally result in parts of your acquisition walking away. Sometimes even the announcement or talk of an acquisition can cause employees to begin searching for another job so as to avoid the uncertainty of going through the acquisition process. The danger of employees walking away is particularly pronounced in situations where talent is a key component of what you are acquiring – departures may substantially impact the value of the company that you purchased.
Lesson 4: It may take years to integrate the firms
Another key lesson with integrating an acquired firm is that it may take much longer than is expected. It is not unusual for the integration process to take years – with legacy systems often complicated to integrate and two different cultures challenging to combine into one.
Lesson 5: Be clear about what you are buying
A final lesson with mergers and acquisitions is being aware of what it is that you are buying. This may sound obvious, but especially if the company that you are acquiring is in a different section, it is important to really investigate the company – understanding its technologies, markets, customers, and resources. The winner’s curse in mergers and acquisitions is that they are ‘won’ by the company that has overpaid the most for it – the company whose expectation of the prospects of the company was most inaccurately overstated. Critically examining the company can help ensure that you are not overpaying for a company whose prospects are not as attractive as you initially expected.