The big myth in post-acquisition integration
If there’s one consistent message that we’ve heard over the last 15 years of doing post acquisition integration, it’s this:
Big deals are more difficult to integrate than small ones
Whether it’s the investment bankers / accountants / lawyers / consultants or Heads of Corporate Strategy, this message is probably the one thing that everyone agrees on. Complexity is directly correlated with size…for the following reasons:
More people requiring more effort around alignment, retention, communication…greater potential loss of productivity
More moving parts in the form of operational complexity, leading to greater opportunity for process variance and divergence
Wider product range which needs operational / support services
More customers with differing demands and expectations
Within support services, more complexity around financial reporting and financial management, broader and deeper technology requirements leading to greater service challenges, for HR talent management, training and development, organisational structure issues
In the context of reputational risk and compliance, more potential for non-conformity etc
Potential cross border and geographical diversity
All of these are good reasons for the perception of complexity and integration difficulty. Let us now look at where complexity arises in the acquisition of smaller businesses:
Inconsistency of process and a lack of policies. Often a business environment which is focused on good practice, most of which is held in people’s heads.
Leadership based on relationships rather than delegated authority. In family owned businesses which tend to the small these days than the larger (certainly in a Western context), the influence of the shareholder which is hard to articulate and even harder to replicate.
Chronic under-investment in technology and operational support systems. These are typically added through necessity rather than through good business practice. Decisions about technology are often based on price rather than capability and then made so bespoke so as to represent a significant ‘key man’ risk with the ‘owner’ of the system.
Highly personal customer and supplier relationships where the relationship owner also represents a ‘key man’ risk. No data about the nature of the relationship and where / if at all, money gets made.
Employees who are bound into the culture through longevity and choice, such that any change is regarded with suspicion.
Service level standards which are subtle, undocumented and therefore hard to replicate.
An instinctive customer focus with none of the ‘distractions’ (in the eyes of the current owner) around Health, Safety, BCP, Environment etc.
No spare resources in a lean corporate environment.
Let’s not let size and scale dominate our thinking and pre-determine our effort with regard to integration. Deal value destruction happens in large and small transactions…and what might appear small from a corporate head office perspective, could be enormous at the country level. For an elephant, the cat looks very small… but for a country based mouse?