• Friday, March 01, 2024
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Are you really ready for an acquisition?


Are acquisitions part of your company’s growth plan? Odds are the answer is yes. In the first half of 2012, thousands of mergers and acquisition deals took place globally, totaling more than $900 billion.

And that was a slow year. Predictions are that 2013 will be even more active as companies that have stockpiled cash look to invest in new growth opportunities.

But acquisitions can be risky business. Studies suggest that as many as 2 out of 3 deals don’t realize their goals. And of course some of them fail spectacularly.

Given the fact that mergers and acquisitions are critical pathways to growth, companies will continue to pursue them, no matter what the potential downsides. However, there are two steps that managers can take to make sure their firms are ready for the challenges ahead:

First, create an ideal picture of what you want a combined company to look like one year after a successful integration – not just in terms of finances, but also in regard to operational practices, organizational structure and culture.

This thought process will clarify your assumptions about how much change you think the company needs. More importantly, it will give you a basis for dialogue with other managers about their expectations for change, which might be different than yours.

The second step is to do what we might call ‘’backward resource planning.’’ This means starting with the vision and then working backward to see what resources, governance and skills will be required to realize it.

One of the fundamentally flawed assumptions that companies make about integrating acquisitions is that managerial and professional time is infinitely expandable.

The reality is that the best employees already have crucial responsibilities that require their full attention.

So when they’re asked to also take on integration assignments, they end up making choices about what not to do and all sorts of things start falling through the cracks.

Some executives deal with this problem by hiring armies of consultants to do the heavy lifting. What they don’t realize is that managers still need to work with these consultants to make sure that the work is being done properly.

Combining all or parts of two companies will always be challenging and entail a certain amount of risk. But before you start chasing that shiny new deal, it’s important to take a hard look at what it will take to succeed, and what it will take to get ready.

(Ron Ashkenas is a managing partner at Schaffer Consulting, and is currently serving as an executive-in-residence at the University of California, Berkeley’s Haas School of Business. His latest book is “Simply Effective.’’)