The Leader’s Role in Making an Acquisition Work
In the lifecycle of many, if not most, businesses, a time comes when it’s best to start de novo, or from scratch. At other times, the most effective strategy is go out and buy another company.
New acquisitions provide opportunities not only to obtain new service and product lines but also opportunities to find new and great talent for your firm. New employees can sometimes equal super talent. They are immediately accretive to your financials, meaning that when buying a company operating in a profitable fashion, you get some level of consolidation in overhead, are immediately adding the sales and gross profit dollars, and in turn, net profit dollars to your bottom line.
As a result, buying companies through an acquisition process to layer onto your existing business enterprise can sometimes be a great strategy.
Acquiring a company is, of course, a highly complex process, involving these steps:
- Identify and approach a target company.
- Undertake an assessment and valuation of the selected firm.
- Conduct due diligence and active negotiations.
- Draft a Sale and Purchase Agreement.
- Acquire and transfer of ownership.
Each step of the process is complicated and time-consuming. What’s less frequently examined is the critical role a CEO or business owner plays in ensuring the success of the acquisition. Not only does he or she oversee the progress of acquisition to its final objective, but the leader’s role is also aspirational and supportive throughout what can be an extended period of time.
Leadership Strategies During Mergers and Acquisitions
Here are ways in which a business leader can guiding acquisition towards success:
Be the supporter in chief.
Rarely does everyone within an organization get “on board” right away with a proposed acquisition. Resistance may come from surprising sectors or simply bubble out of a generalized resistance to change. But when the CEO or leader decides it’s the right move, he or she must become “supporter in chief” of the process. This means explaining the reasons behind the strategy to everyone in the organization, continuously promoting the benefits of the move, addressing specific objections as they arise, and so on. There’s no place for a passive leadership role.
Assemble a world-class team.
Different facets of acquisition demand expertise in different areas. An effective leader canvasses available talent within the organization and begins assembling a world-class team in finance, sales and marketing, operations, etc. If the talent doesn’t exist internally, the leader undertakes an active search for talent elsewhere.
The leader also strives to ensure that the acquisition team can and will work smoothly together. No favoritism here! It’s essential that all team members respect one another and are committed to ongoing collaboration. This is where the leader can exert significant influence.
Put together a comprehensive communications strategy.
In the absence of ongoing communications, rumors and gossip can irreparably harm the acquisition process. Without question, key elements of the process involve sensitive company data and close guarding of key information is necessary. On the other hand, you’ll gain far more internal buy-in if you are seen as willing to answer questions, coming forward with ongoing updates and taking every opportunity to share your vision of where the process is headed.
Pay close attention to data and digital security.
The tactical details can be left to your IT department or consultants but stressing the need for data protection is certainly part of the leader’s role. Entrepreneur recommends the use of “a virtual room to help both parties look at each other’s business documents securely and effectively.” Such virtual data rooms “act as a neutral and secure off-site location where members of both teams can be free to share documents and collaborate effectively.”
Serve as a positive proponent for change.
From top to bottom, everyone within an organization on the verge of an acquisition wants to know, “What’s in it for me?” No one is better positioned than the CEO or business leader to actively explain the many expected benefits and advantages of this monumental change.
Don’t put off promoting the desired objective until the moment “feels right.” Take advantage of every encounter—from one-on-ones with your direct reports to addressing an all-company meeting—to describe how the coming changes will make life better for everyone. This doesn’t mean stretching the truth or making wild claims for the future. It does mean dispelling negative rumors and offering your team a realistic appraisal of the rewards to come from an effective acquisition process.
Celebrate milestones and early wins.
Because the process can be so lengthy, it’s good to celebrate milestones along the way. As these milestones are met, be sure to alert employees and host a modest celebration of sorts. When a big hurdle is met or overcome, make a big deal out of it! Your public enthusiasm will be infectious. People will get a clearer view of the overall strategic picture and that enthusiasm can help propel further development in the right direction.
Welcome the new team.
Once the acquisition becomes complete, lead the way by warmly welcoming new employees to the team. Host “get to know you” meetings with incoming departments. Keep everyone informed on plans for strategic collaboration. Encourage your HR department (and/or marketing department) to introduce newcomers to your internal audience. Also clarify how the different teams are expected to work together in the post-acquisition environment.
Purchasing another company and incorporating it into your culture is a huge undertaking. Leadership activities shouldn’t be assigned to others within the company—the stakes are too high, the right conduct too essential. Of course, your trusted lieutenants and others can be called upon to make significant contributions. But the vision, strategic leadership, communication and promotion are the leader’s responsibility. Focusing on these elements can make the difference between a smooth acquisition and a strained, rocky (and potentially failed) acquisition process.
If your company is considering an acquisition, or examining other big growth strategies, take a look at what Catapult Groups has to offer—in monthly meetings of small business advisory groups, in one-on-one business coaching and in our expert business growth workshops. It could be the smartest leadership move you’ll ever make.