Companies make acquisitions for a host of reasons. Sometimes it’s about filling a hole in a product road map, or expanding market share, or finding good people.
Finding the right company to acquire takes special talent. But once the deal is through, it takes skill and a deft hand to integrate the acquired company smoothly into the mothership without losing key talent or making its staff feel like they have gone from building something great to being cogs in a huge machine.
The acquirer has to decide whether to incorporate their culture into the acquired company or let it maintain its own culture and identity. It can be a difficult line to walk, and the success of the transaction can often hinge on how well the cultural integration is carried out.
Beyond culture and people, though, there is also a critical nuts-and-bolts side to acquisitions. Do you keep the same benefits and compensation packages in place, or do you move people to new plans? That process can be disruptive for employees. Worst of all, do you lay people off?
Then there’s tooling. Each company has its own way of doing things, and has unique tools used by sales and marketing, HR and finance. The acquirer and acquired company have to sit down and decide which tools they will keep or abandon without making the smaller firm feel like it’s a “my way or the highway” situation — unless that’s how you do business.
It’s a balancing act. If you care to make the company you’re acquiring feel part of the team rather than a bolted-on component, the entire exercise will get harder.
In an effort to answer all these questions, we’re examining how good acquisitions work in a two-part series. For this first part, we spoke to executives from three companies that have made many acquisitions to get their take on the process and how they ensure the post-deal integration goes smoothly.
In the next part, we will feature executives from three companies that were acquired by the same organizations.
It’s worth noting that everyone involved here is trying to put their best foot forward, and nobody is going to air any dirty laundry on either side of the acquisition equation. The goal of these articles is to learn what the process is like for each side of the transaction, and just how much of a challenge this whole undertaking can be after the contracts are signed and the checks clear.
Looking for the right company
While there isn’t necessarily a formula for finding good companies, the executives we spoke to all discussed a process that they have developed over time based on their experiences acquiring companies.
Ashley Andersen Zantop, COO at edtech firm Cambium Learning Group, has been involved in a number of acquisitions in her time with the company. She said Cambium has pursued an acquisition strategy over the years to complement the company’s organic growth, and for starters, a good fit would be digital edtech businesses aimed at the K-12 market.
Once a company checks those boxes, she looks at other standard metrics like revenue, market reach, profitability and so forth.
“Of course, we’re looking for some of the more standard … kinds of things that you think about when you’re considering an acquisition,” she explained. “And depending on the problem the business is trying to solve, and for whom — what its real value proposition is, what it’s trying to do in education. That helps us understand whether it should be part of another business that already exists in Cambium, or if it has its own unique value proposition and should therefore be a stand-alone business.”
Oscar Werner, CEO at customer engagement giant Sinch, said that his company looks at the target as a whole, but he sees the people part of the deal as the key component, even more so than the product.
“We say ‘no’ to a lot of companies when it comes to the people. We just know these companies and we just say ‘no,’ because it’s not there. So the people aspect is just as important as the technology, and just as important to us as a product. [We need to know if] we can work with these guys and if we will have fun, and that’s an extremely important part of our process to win the deals,” he said.
Heather Hartford is chief people officer at Acquia, which itself was acquired by Vista Equity Partners in September 2019. Vista tends to build on its acquisitions by adding financial resources, and Acquia has taken advantage of its parent’s willingness to finance deals by adding pieces to its platform. Hartford said every purchase is about how they can improve the customer experience, which mirrors what Acquia does.
“Everything we do is about the digital experience. So if we are going to purchase a company, [we think] if it makes our products work better or harder for our customers, or if it fills in something that’s missing,” she said.
“This last company we just bought, we were [outsourcing] a different product, and we looked at buying that company. But as we got closer to their culture, people and programs, we kind of all took a pause and said hey, let’s go look at their competitor. And we ended up buying their competitor,” Hartford said.
Opening lines of communication
Once the deal closes, it’s time to bring the company into the fold. But this is not just some nebulous idea of integrating a company and a product — it’s about the people who have put a lot of time and effort into building the company, and they are left with a lot of unknowns and uncertainty.
Cambium’s Zantop said it’s really hard to nail communication. “I like that you hit on communication, because that is one of the biggest efforts that’s never done when it comes to all of this.”
She said when it comes down to it, her company made this acquisition because it genuinely values what the other company brings to the table. What’s more, they want to make this work well for both sides of the transaction beyond the exchange of money.
“We start with the fact that we believe that we’re all united by a common purpose, and that we are specifically helping [all our stakeholders] with a particular problem. So we’ve organized and evolved unique cultures around solving those problems.”
She said when they go through the process of bringing people on board, they look at that business and try to figure out what needs to be integrated versus what needs to be supported.
Werner said Sinch has the luxury of having a large team of over 100 people whose job is integrating acquired companies and making them part of the whole. That involves a defined process with checklists and playbooks, but he said that it’s more than simply following a strict regimen — it is keeping in mind that you are welcoming people into your organization, and you need to keep that front and center.
“You can execute the playbooks, the process of when you send what email, and what have you. We have templates [for that] … but then it’s about your own values that you promote in your own organization.” He said that you have to figure out how to express that to the acquired company.
Nuts and bolts
As the acquiring company moves through this process, it must figure out how to incorporate the product into the broader platform, and what role the employees in the acquired companies play.
Then you have to deal with the practical components of any acquisition, like payroll, sales, marketing tools and all of the systems the parties use to run their companies. All of these pieces will play a role in whether employees stick around or move on.
Zantop said that they work with the acquired company, and if they have a valid reason for keeping a particular tool, they will sometimes let them do it. But overall, it’s much easier to have everyone standardized whenever possible.
“When they’re doing something different or using a different tool, you want to understand why first […] because sometimes the answer is, ‘Yup we’re a Salesforce shop, so everybody’s going to be on Salesforce, right?’ But other times there might be something unique or different or special or critical about the problem that they’re trying to solve for the customer […] that does require a different tool or a different approach. We have to be mindful that we don’t ignore that and we embrace and incorporate it [when possible],” she said.
Hartford said it’s a matter of the two companies learning from each other, but in the end, you have to come to a consensus, because you can’t be operating on two payroll systems, for example. She believes it’s best to get some influencers from the company being acquired on board, get them enthusiastic, and then they can help get everyone excited.
“They become the amplifiers for everything you’re doing. So, you know, buckle down, not just financially, but build trust, build relationships, and leverage them to bring the team along with them, and then be prepared to make trade-offs.”
Werner agrees, saying you really need to convince everyone that staying put is in their best interest. “You know you can have synergies, but [you need to] keep and motivate the key people that you want to keep, and that is the most important thing […] and everything goes [off] that, because you have time to fix that as long as you motivate people,” he said.
It’s never easy to acquire a company and find ways to take the best of what they were doing and make it part of something else. There are many stories of deals failing to produce the results that everyone hoped for, but these three company executives have shown that there are some key success drivers like communication, mutual respect and remaining humble throughout the process.
We know it doesn’t always work that way, but if you approach the merger with goodwill, the chances of success are going to be greater.
In part 2, we’ll talk to executives from three companies who were acquired by these companies to get their perspectives.