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  • 3 Secrets to a Successful Acquisition

    Jul 21, 2022

    IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities.  Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog article has been provided by Riley Jade.

    3 Secrets to a Successful Acquisition

    When it comes to growth, mergers and acquisitions (M&A) these investments are usually made to improve two companies. Our article on “Growth Strategies for Mature Companies” identifies factors such as the business capacity, products, and distribution as reasons for pushing through with a M&A. When companies have complementary products and services, their combined resources and better logistical capabilities can create synergies geared towards greater economic growth.

    However, despite these projected benefits, a study on M&A success from Grand Valley State University found that 70% to 90% of M&As fail. Often, these problems stem from difficult integrations between brands and systems, especially when company cultures are incompatible. Acquiring companies should be liable and take the necessary steps to ensure that both groups of the M&A are able to thrive. Today, we’ll be looking at the case study involving Amazon’s acquisition of Whole Foods. Read on to learn how you can make the M&A process for your businesses successful.

    Understand How the Acquisition Can Add Value

    Growth is what ultimately drives M&As. The value of every acquisition is how it can allow the merged companies to become more competitive, especially as they scale up their productivity and output. For instance, recent years have seen a boom in online shopping. As Slate reports it, the acquisition of Whole Foods by Amazon opens up an opportunity for them to delve into united loyalty programs, discounts, and even same-day deliveries for groceries — giving them an edge over other online retailers.

    There were also concerns about their conflicting business models that may affect their future success. When considering an acquisition deal, it’s important to evaluate whether leverage can be given to both current and future customers of both sides so as to minimize losses. Additionally, other elements such as location and logistics should be considered as evaluating how businesses can create value for everyone.

    Prepare for Cultural Integration

    Cultural integration requires an understanding of both companies’ interests and priorities based on the people working there. These norms are not only limited to employees, but also extend to stakeholders and competitors; staying consistent in company practices is essential for establishing the brand. Unfortunately, many businesses fail in this critical step. As a write-up on M&A mistakes by LHH notes, failed cultural integration is the primary cause of around 30% of failed M&As. Some common mistakes include trying to deliberately erase legacy cultures, not supporting middle managers, and repeatedly selling the rationale of the deal instead of tackling practical issues – to name but a few.

    For instance, Whole Foods founder John Mackey as interviewed by Fortune mentioned how the company and Amazon also had to deal with challenges in culture; they had to adapt to the “tight” routines implemented by Amazon, which is a stark contrast to Foods’ “looser” culture of idealism and high margins. To resolve cultural gaps, it’s important to create common ground, be honest, and put emphasis in middle management to ensure everyone’s concerns are addressed.

    Have a Team and Set Clear Goals

    Much like integrating culture, having coherent goals demands proactivity in leadership. You need to assemble a team of both staff and advisors so there is a proper discussion on what needs to be done and who will be involved in the processes.

    As affirmed by John Mackey in the aforementioned interview: to become a “conscious leader”, you need to respect and trust your personnel’s judgment. Having confidence in your people to manage the business flow, as well as continually consulting with your M&A mentors, will make it easier to set targets for the merger’s success. Clear communication is the key to ensure that everyone is on the same page and working towards this common goal.

    Written for ibainc.com

    By Riley Jade

    IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.

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