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The Joy of Acquisition or the Pain of Being Acquired?

Are acquisitions a good thing? I guess it depends on who you ask.

Are acquisitions a good thing? I guess it depends on who you ask. According to most studies, 70- 90% of acquisitions fail. Why is that? Lack of strategic fit, cultural differences, poor communication, employee and customer attrition, overestimating synergies and weak leadership. Probably, and then some. But as we know, acquisitions continue to happen. Why is that? Well besides the obvious monetary windfall for owners and shareholders, there are the typical messaged reasons like economies of scale, diversification, greater market share, increased synergy, cost reductions, or new niche offerings. Makes sense in theory, but what about in execution? You know, in the real world.

From what I have experienced, a few individuals make out big as a result of an acquisition, while dedicated staff members get the short end of the stick. But not in all cases, about 10-30% work out—not great odds, in my opinion. And having been on the receiving end of two acquisitions that ultimately failed, I can speak to this idea from having been there, done that. From what I have witnessed, acquisitions are one those ideas where the fantasy doesn’t always manifest into reality. It’s like going all-in on a relationship and expecting the world’s greatest love story, but you don’t really know the other person at all. 

At the base level, I don’t think these acquirers do enough due diligence as to who and what they are buying. It’s as if they don’t bother to understand the people of the organization beyond senior management. Apparently, they don’t think it’s necessary. Trust me, it is—if you want to have any chance of succeeding. Of course, the acquirer could be purchasing a company that is a shell of its former self. That doesn’t mean there still isn’t an embedded culture that permeates the entire organization. When you haven’t done proper due diligence, you are destined to make decisions that undermine your investment in the future. Many times, within the first year.  

My advice is that if you are on the acquiring end of a company transaction, do extensive due diligence and make sure you thoroughly understand the history and culture of the company you are buying. The other thing I recommend is to make things better than you found them. What a concept...I’m sure the acquirer is oftentimes under the impression that they know better because they are the conqueror, so to speak. People are not indentured servants; they have a choice. You may be buying facilities, equipment, technology, and other assets, but if you think of the people as collateral damage or disposable commodities, you are in for a rude awakening. At the end of the day, you don’t own a thing if you don’t have the commitment of acquirees, customers, and partners. 

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