By Jack Prouty
President, M&A Leadership Council
I am a simple guy and I just don’t get it. I would appreciate someone explaining this to me: “Why is it a company spends $50 million, $100 million or more to install an ERP system, which will make them industry-average? Yet, when it comes to an acquisition which may re-position them in the industry and create competitive differentiation or even swallow their competition, they don’t properly invest in the integration effort itself (appropriate resources, competencies and expertise)?”
Why is it that an executive will pay a premium for a company, spend millions on doing the deal and incur high costs for severance, facility closing, etc., but won’t invest the money to ensure the acceleration of the speed of the integration minimizes business risk and maximizes the business benefits?
Everyone has heard the statistics (“50% or more of acquisitions fail to increase shareholder value and often erode value”), yet companies continue to do what they have always done by throwing good people at the problem… people who already have full-time jobs, have received no training on M&A integration, and go into battle without proper tools, processes, resources, and management support. And as the saying goes, “if you do what you have always done, then you will get what you have always gotten” (50% failures).
As we emphasize in our public workshop, The Art of M&A Integration, there is an art and a science to successful M&A integration. Companies that focus on building in-house M&A competencies and executing the critical success factors can “stack the deck for successful integration.”
Executives that continue to take on acquisitions without getting serious about investing appropriately in the effort (both headset and skillset changes) will create great opportunities for the turnaround executive that replaces them or the consulting firm retained to deliver a major cost improvement project down the road.
As I said at the beginning, I don’t get it. Please let me know what I'm missing….. [email protected].