Vivek Bhaskaran is founder & CEO of QuestionPro, a global provider of online research and surveys software.
According to Tom Miles and Brian Healy, coheads of Americas M&A at Morgan Stanley, the pace of mergers and acquisitions is expected to accelerate in “the second half of 2023 and beyond.” If you think you’re in the market to grow your business through acquisition, this might be the time.
Experts will tell you that acquiring a company is a complex and challenging process, requiring extensive analysis, planning and execution to ensure success. I’m here to tell you that’s not completely true.
In just the past two years alone, QuestionPro has acquired and integrated five companies. In my career, I’ve acquired nearly a dozen.
Here are my five hacks for a successful transaction.
1. Know the “why.”
Before you start the acquisition process, it’s important to answer this simple question: “Why are we doing this?” Is it to acquire customers or a book of business? Is it because you need technology that you can’t develop yourself? Is it to prevent a competitor from getting a toehold? Make sure you understand exactly how the transaction fits into your overall business strategy. From there, you should be able to determine a relative non-numerical value (e.g., critical, beneficial, nice-to-have or do it if we can get it cheap). This positioning is needed to determine your actual financial value.
2. Know the price (yours and theirs) upfront.
Once you determine how strategic the deal is, you need to set a price range. Ideally, you get your partner to do the same. This isn’t to say that you negotiate the price before anything else. Instead, try to have an honest conversation about whether you’re both in the same ballpark. All the due diligence in the world won’t matter if you’re far apart on price. All you’ll have to show for it is a big legal bill.
3. Find compatible cultures.
Nothing will tank a transaction faster and more spectacularly than a misaligned culture. Now more than ever, employees are choosing employers who share their values, and leaving those companies that don’t. The results of one recent study found that 74% of employees would leave a company with a toxic culture. If you find an acquisition that looks good on paper but its corporate culture and values differ from yours, the deal is doomed to fail.
4. Involve as few people as possible.
Nothing can freeze productivity faster than rumors and watercooler (Zoom sidebar?) chatter about a potential acquisition. It tends to freeze employees because they immediately (and rightfully) worry about whether their job will survive. Keep your transaction team small and comprised of your most trusted team members. Create private/protected workspaces for document sharing and collaboration. Move meetings offsite or use Zoom—nothing gets noticed faster than the same team of execs in a conference room day after day.
5. Focus on integration.
Once the acquisition is complete, it’s important to focus on integration. If you’ve picked the right strategic reason for the deal and you’ve ensured values/culture alignment upfront, the integration will still be challenging but much less so. The integration planning should start at the tail end of due diligence so that the basic framework of the plan can be implemented on Day 1. Then, involve both leadership and “rank and file” members of both teams to finalize the plan—this will help ensure buy-in and collaboration.
I’m sure many who have gone through an M&A will say I’m oversimplifying this. Or that there are five other/better best practices, and that’s probably fair—this isn’t a “cookie-cutter” kind of process. Ultimately, you need to tune the process based on your leadership style, level of patience, corporate culture and, ultimately, how strategic the deal is to your business.
It may not be simple, but it sure doesn’t have to be complex.
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