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Visit us at the SIA Executive Forum at the Fontainebleau in Miami Beach on
February 28-March 3, 2011 at Booth #226
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Those companies that master M&A usually institutionalize three complementary strengths for repeated success in acquisitions.
First, all realistic potential cost savings are explored at every level of the targets' operation, an approach that allows senior management to focus on revenue building to really capitalize on the acquired firm.
Second, acquirers recognize that successful mergers lead to a virtuous cycle of better deals and better results, so these companies forge a meticulous merger discipline that improves with experience. If you are paying attention, the more you acquire and learn, the more you should improve the all-important integration phase as this is where successful acquisitions come to fruition.
Third, to instill a performance culture geared for growth, they use every means they have--notably entrepreneurial, well-mentored teams with ambitious targets and incentives that communicate and sell tirelessly every action to the acquired staff who can make the deal a great success or fight the acquirer every step of the way.
Success is determined above all by the ability to protect revenue and to generate growth after a merger. A smooth integration and a solid communication plan are keys to success in this area.
Those acquirers that get the balance wrong by plunging headlong into cost savings may soon see their peers outstrip them in growth. One must be very careful before cuts are made that you are sure you thoroughly understand their impact and that they are warranted or you may be throwing the baby out with the bath water.
How they do it!
A thin line divides the kind of merger that nurtures a company's growth from one that destroys value. No surprise, then, that M&A practitioners go to great lengths to tilt the odds in their favor. They bring together M&A teams, to modify the organizational design of their companies, or add systems, tools, and processes to smooth integration and to accelerate the capture of synergies.
This advice in this Newsletter was derived from several Consultants from McKinsey & Company as well as our staff.
 | | M & A Integration Team |
M&A is a Tool
Industry findings in a survey a few years back found that those Business Development Officers at most of the rewarded acquirers tend to treat M&A as a tool to support strategy, not as a strategy in itself.
Integration Teams
M&A teams made up of former investment bankers and lawyers are not a differentiator of performance.
Instead, the tenure of an executive was a differentiator; companies with longer-tenured executives during a period of acquisitions were more likely to be rewarded. This is often where an experienced M & A Adviser who knows the Staffing Industry can often help.
Other necessary factors-including organizational design, people, systems, tools, and processes are insufficient without a solid approach to acquisitions and integration.
It's not surprising that executives planning for M&A often look to acquirers with track records of success for insights. After all, effective deal making can be a source of superior corporate performance, and the capital markets tend to reward companies that have executives with experience in planning, carrying out, and integrating mergers and acquisitions.
If the essentials for the governance and execution of M&A are in place, many companies can carry it out successfully with a small, experienced team that pulls in resources project by project.
M&A Can Be Risky as a Total Growth Strategy
Many companies act as though acquisitions are their growth strategy. These companies acquire repeatedly for the sake of top-line growth, without a clear plan to capture additional growth once the target is integrated and synergies are captured.
An acquisition can be a powerful builder of short-term value for these companies, but an astute operator knows this is where an acquirer needs to look for more growth opportunities for their acquired business.
The Business Development executives we spoke with had similar motives including adding capabilities, expanding geographically, and buying tuck-in growth add-ons for their acquisitions.
Yet the executives at companies that reaped market rewards insist that M&A shouldn't be a strategy on its own. Instead, it ought to be a tool to fill strategic holes, such as diversifying an asset profile or expanding a geographic footprint, that can't be filled as efficiently on an organic basis. The connection between successful acquirers and their adherence to an overarching strategy is also shown by the fact that none of them acquired companies for defensive purposes--that is, to block a competitor.
For these companies, it would seem, M&A strategy is proactive rather than reactive.
This observation isn't meant to downplay the importance of acquisitions in overall company strategy. When used correctly, acquisitions are a necessary part of a large company's growth.
Many large companies generate more than a third of their long-term growth through acquisitions. However, acquisitions should be viewed within the context of the overall corporate strategy.
If you would like to discuss your M&A strategy contact us for a confidential conversation.
Contact Sam, Bob or Mike, who have successfully completed over 125 staffing industry transactions, if you'd like to discuss M&A matters related to your staffing firm.
http://www.racohenconsulting.com/contact.html
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