Mike Keech, CEO, Liquid I.V., an LA-based wellness company offering science-backed electrolyte drink mixes available nationwide.
The mergers and acquisitions (M&A) landscape is littered with seemingly serendipitous linkups gone lame. In fact, a research study of 1,780 global M&A deals over the past ten years that involved fast-moving consumer goods (FMCG) companies found most failed to deliver any ROI.
That’s a less-than-stellar track record. However, according to the same study, some deals have defied the M&A odds. As someone who became CEO of a company after an acquisition during the height of the pandemic, I consider myself one of those who helped defy these odds.
For leaders of high-growth companies looking to maintain momentum, there are many lessons to learn from past M&A successes as well as failures. At the same time, even would-be acquirers can gain insights into the building blocks for successful acquisitions.
Common Culprits Of Underperformance
There are reasons aplenty for poor post-acquisition performance. The ability to infuse energy, maintain an entrepreneurial mindset, spur innovation, pursue rapid growth and make quick decisions often vanish.
Research published in the Journal of Business Venturing Insights cites these common culprits: Resource starvation, absence of autonomy, excessive complexity, weak communication, rapid action barriers, faulty cultural fit and suspect synergies.
For example, DealRoom—a unit of M&A Science that’s worked on hundreds of acquisitions—recently reported on lessons learned from deals, both good and bad. In Amazon’s acquisition of Whole Foods, for example, we can blame culture clash. Underestimating culture can be perilous, DealRoom says, citing a litany of failures due to cultural incompatibility.
What can leaders of fast-growing companies do to maintain or accelerate momentum at their own firms? Here are six lessons from my experience.
1. Diligently defend entrepreneurial DNA.
The ability to act quickly, sans excessive operational constraints, is vital to maintaining momentum. Divisional leadership should actively seek to preserve the entrepreneurial spirit of subsidiaries, and the subsidiaries should support efforts to do the same.
Overall, growth company leaders seeking to maintain momentum must constantly fuel the entrepreneurial engine that powers their own performance.
2. Preserve autonomy.
Like it or not, total autonomy within large organizations is rare. And, frankly, I find it unnecessary. Instead, aim for a measured degree of autonomy where clear and open communication creates trust and eliminates any urge to limit the acquired company’s self-sufficiency.
Rapid-growth companies can do the same by providing autonomy to operating units and leaders. Allow them to make decisions knowing they have your trust and support, even if mistakes are made. Aim for high levels of empowerment and radical transparency to foster trust and buy-in.
3. Cultivate the culture.
It’s crucial to identify and build on the unique cultural strengths that helped foster rapid growth in the first place.
Of course, “culture” is a slippery concept with diverse definitions. Make sure to be clear and transparent about your values, purpose, guiding principles and community commitments—in addition to where you play and how you win. Then, balance that with identifying future-state strengths needed to succeed going forward.
4. Recognize resource requirements.
I’ve found that a strong underlying philosophy of a parent corporation’s role should include providing the resources necessary to support business unit growth. As CEO, I’ve articulated my company’s needs and made the business case when necessary to ensure we have the resources and support needed to meet and exceed our growth goals.
Simple inertia won’t maintain momentum. Make sure to constantly rearm your teams with the tools and resources they need to innovate, make mistakes and maintain momentum.
5. Resist synergy seduction.
In a Bain & Co. survey of 352 global executives, 70% said most M&A deals overestimate synergies—a major reason deals disappoint. Quantifying potential “synergies” is particularly prickly, and the word itself is sometimes a euphemism for “cutbacks.” Be careful to leverage synergies that are growth enhancers, not growth inhibitors.
Seeking synergies can backfire and sap the life from momentum. Instead, I recommend that you invest in empowering your people. Foster a feeling of ownership—this is their business and they can do their best work here.
6. Purge preconceptions.
Patience is key. In my early days leading my current company, I had to resist the natural human tendency to approach new situations with preconceived notions. Sometimes, unlearning old lessons is an essential precursor to learning new ones. You’ll struggle to maintain momentum if you assume what worked yesterday will work tomorrow.
I know first-hand that it’s possible for high-growth companies to maintain and even accelerate momentum post-acquisition. By adapting these lessons, I believe companies in all growth stages and industries can do the same.
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