04 Apr Post-Merger Integration Success for Tech Companies
M&A is a great strategy for tech companies hoping to stay ahead of tech innovation. The theory behind mergers and acquisitions is sound, but when the execution is poor, these deals fail to realize their potential value. In one 2016 study of tech executives, a stunning 92% reported that their most recent acquisition had failed to live up to expectations. These failed acquisitions exact a significant toll on the participants, and often the problems could have been avoided.
Failed acquisitions typically have at least one of two problems. Either management did not understand the value drivers for realizing the promised return on investment, or there was insufficient planning or execution for post-merger integration. To prevent these issues from destroying good deals, executives need to initiate the M&A process with their goals in mind.
Tech and Talent Deals
So-called tech and talent deals usually involve the acquisition of a smaller company to gain access to its people, its tech, or its brand. These deals often move quickly in an attempt to gain market share or catch up with competitors. These deals present the key challenge of ensuring that the critical talent remains on board following the merger, since staff often have a negative view of changes of ownership. Retention bonuses, cultural transition plans, promotions, and getting buy-in early can all play a role in keeping a company’s valuable assets on board.
Integrating Larger Businesses
With larger mergers, it’s important to be strategic. In most cases, the acquired business continues to operate as a separate entity, but the acquirer must decide whether to ultimately roll the acquired business into its parent business or not.
These deals present many challenges. There may be unreasonable growth expectations, different visions for the company, and divergent business models. Integration planning must be a part of deal talks. Ideally, members of each company should be on the integration team.
In both scenarios, planning is key. An expert team can help you identify potential integration challenges and cultivate a plan for managing them before they turn into crises.