The Strategy of Acquisitions

As the CEO of a midlevel company, it’s likely that you will, at some point, experience an acquisition. You may decide that your company would benefit from joining with a company that offers increased funding or strong organizational synergies. Or perhaps the best way to improve operations is to acquire a company that opens up a new market for your product, or will provide needed infrastructure to your growing business. Regardless of the reason, a whole collection of challenges comes along with the benefits of merging with another company. This week’s guests are experts in navigating those situations quickly and effectively.

I’m happy to welcome Kim Eaton and Jack Walsh, from Aptean, a global leader in mission-critical enterprise software solutions. Eaton, Walsh, and their team have acquired 11 companies in the last 18 months, and they’ve got the process down to a science.

Stick to Your Strategy

Stick to Your StrategyFor Aptean, acquisitions are in their DNA. The company was born out of a merger in 2012. The parent companies, CDC Software and Consona Corporation, had both participated in acquisitions themselves over their 10-15 years in business. The process of integrating culture and operations of these two companies became the basis for the strategy that Aptean uses for its acquisitions today.

In 2015 the Aptean team decided to develop their model to be one in which they acquire smaller businesses “who are really on the verge of growth, but haven’t figured out how to make the right investments to really enable that acceleration,” says Eaton.  “We decided to really transform the business to do acquisitions, and bring together like types of leaders and developers to help drive success in each of those businesses.”

To develop their acquisition strategy, Eaton and team looked at where their strengths were. They found that they had strong resources in R&D, support, and service. They also realized that they had an extremely strong customer base, and that much of their growth had come from expanding services within that customer base. This led them to a two-part strategy: put more focus on the customer, and target acquisitions based on products and services that provide more solutions to that client base. This focus on the customer permeates every step of the acquisition and integration process.

While they follow a defined system for acquisitions, they look at each one uniquely. Easton says, “We look at each business on its own, and recognize what is going well, and where the places are that Aptean can really help them.” The Aptean team does most of their work in the first 90 days. They spend about 30 days reviewing the company, looking for structural and operational shortcomings, with the intention of finding ways to drive the revenue up quickly. It takes six to nine months, in general, to get the organization stabilized, and they tend to see revenue increases within the first year.

As far as keeping the team engaged, they communicate quickly and clearly what it is they intend to do with the company, and how that will affect current employees. Says Eaton, “I think the more we help people see what we’re trying to do, and we create a purpose for it, then people rally around that.”

Integrate Financial Methods

The first step in the strategy after acquisition is to insert Aptean’s financial systems into the acquired business. This gives them a fast way to get their heads around what’s happening in the business and how the business is performing. This also gives them a clearer understanding of what needs to be done. The second step is to integrate the finance departments of the companies. They make sure they are keeping the best people for the team, and reorganize to drive efficiency in the organization. Says Walsh, “It’s not just about cutting costs. It’s about optimizing the business, and making sure that if products need investments, or client relationships need emphasis in a way that hasn’t happened in the past, that we can come in and take those actions.”

Organizational Synergies

Organizational SynergiesA major reason that companies decide to walk down the aisle together is the synergy that can come from the union of the companies. Aptean brings their customer base, as well their resources in R&D, support and service. They have years of experience in optimizing products and companies. They are currently looking at ways to leverage shared data across their acquisitions (check out last week’s article on monetizing your data). Says Eaton, “A big part of what we’re trying to bring to small and midsize companies, which don’t always have the benefit of the investment that a larger company does, is the ability to gather big data on themselves.”

They look at every acquisition uniquely, and they are great at achieving their goals. Walsh says, “I can tell you from experience that we achieve those synergies. Not necessarily always the way that we planned it at the time we do the deal, but we’ve got enough levers we can pull, given our experience over the last two years, that we’re achieving the benefits that we’re looking for, and in many cases more than what we had expected.”

Communicate

CommunicateAcquisitions can be stressful for the employees of the business being acquired, and if you don’t want to lose either productivity or team members, you need to keep them informed. Eaton has gotten positive feedback on her team’s communication. She explains, “We moved fast. We don’t let people wonder what’s going to happen to them. We really try to communicate, ‘This is going to be the process. By this date we’re going to tell you exactly what we’re going to do.’ I think this is a really important point. When you have people linger, they’re just going to leave.”

They also do their best to communicate not only what is going to happen, but why. For Aptean, the customer is at the center of the changes they make. Eaton says, “We want to bring more value to our customers. We want to help strengthen the relationships with our customers, and in order to do that, we need to drive better best practices…The reason those people are at the companies is because they love what they do for their customers. So when you bring it back to why, I think that really helps people be comfortable.”

Take Care of the Team

Take Care of the TeamAcquisitions can provide a great growth opportunity for team members on both sides. Often, the CEO of the incoming company retires, leaving a general manager position open for someone from the business being acquired – or for someone already on the Aptean team. In joining a larger organization, team members can often find even better opportunities to utilize their skill sets. The key is, as we’ve already mentioned, is to communicate clearly, and keep the customer in mind.

No matter how smooth the acquisition, there are always difficult conversations that need to be had. Clear communication is important here as well. Sometimes long-time employees are not a fit for the future of the organization. Do your best to find a fit for them elsewhere in the business, or help them find placement outside the company. Present the opportunities and let the employee make the decision that is best for them based on those options. Says Eaton, “We try to give them a chance to take a look at it, and decide what they want to do. Most of them have moved into roles that are broader at Aptean, and have added tremendous value to our overall business.”

Acquisitions are great learning opportunities, as well as great opportunities for your business. Know your reasons, have a strategy, and keep the customer in mind at all times – and you can find new levels of success for your business.

By | 2017-10-03T21:37:20+00:00 March 30th, 2017|0 Comments

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