The Point: The usage of acquisitions to divert and reshape corporate strategy has never been more prevalent than in today’s new economy. Today, many leaders prefer purchasing a company as a way of creating easy access to products, technology, markets, management talent, or assets as less risky and faster than picking up similar goals via internal endeavors. So at Tip of the Spear Ventures, we put our M&A hats on and wondered “What is the problem with acquisitions?” After all, it would appear to be not only in vogue, but a relatively easy approach to accomplish organizational growth goals. So in this post, we’ll explore Mergers & Acquisitions: The Problem with Acquisitions along with providing 3 tips… Enjoy!
M&A Headquarters… We have a Problem!
It is now very clear that there is a difference between (1) acquiring a company and (2) making it work! There are countless M&A corpses strewn along the business super-highway as reminders. As leaders, we need to understand how to manage acquisitions better and not looking beyond conventional advice.
To make acquisitions work, most analysts often stress one of two methods. First of all, the strategic fit between the target and its acquirer, and secondly how important the proposed subsidiary can provide/adapt to the parent organization’s technique (or modus operandi).
M&A Round Peg in Square Hole
The need to meet an organizational fit between the two companies was what the other approach stressed on – that is, by matching corporate cultures, demographic features, or administrative systems. The success of an acquisition is guaranteed if the degrees of strategic and organizational fit are enough.
Most often, friendly acquisitions that follow this advice fail to work, why? Managers can gain insight into this question on the real acquisition process and not the strategic fit or organizational fit.
3 Tips That Affect the Result of the Process
Recent research reveals three tips, or factors, inherent in the process can affect the outcome:
Tip #1: Fragmented Perspectives
As a result of analysts and specialists involvement in a specific ability and independent goals, fragmented and multiple views of the agreement may occur. General managers may find it difficult to integrate these perspectives. Most of the time, analysts with specialized skills and managers dominate the process of acquiring a company. It will be difficult for managers to support a generalist grasp of the transaction just because of the need for complex technical analysis and number of tasks to complete.
Tip #2: Integrating Perspectives
When the momentum to close the deal is increasing, it can force closure prematurely and thereby limit any consideration of integration issues. The challenges of fragmented perspectives are conquered by top executives if active roles are performed during the acquisition process. Strategies to structure balance among different groups and interests to ensure the proper analysis of integrated sets.
Tip #3: Some Ambiguity Issues
Most of the time, buyers and sellers were unable to resolve some important areas of ambiguity before agreements are complete. Financial analysts and researchers often describe acquisitions as acts of strategic calculation. In sharp contrast, those involved directly with the acquisition process always point to powerful forces beyond managerial control that increase the speed of the transaction.
So What Exactly is the Problem with Acquisitions?
The factors above may manifest acquisition plans, which might be over an extended period, or amid transactions, which will probably be in haste. For every procurement, supervisors ought to consider what factors are making the procedure accelerate and recognize transparency between corporate strategy and other factors like the interests of personal profession or special groups and personality issues – all these intertwine in most cases.
This is the perfect moment senior leaders need to reevaluate their assumptions about acquisition actions in a principal way – neglecting this will cause a problem with acquisitions. Preservation reassessment by the boards and executives in both purchasing and target organizations with regards to the procurement’s purpose and their capacity to gain benefits in the long haul from the proposed combination may uncover different issues that each party ought to know about. Building up superior understanding of the inconspicuous but useful role that the acquisition procedure plays in the outcome of procurement is an imperative piece of the first reassessment.