Corporate acquisitions are sexy. They are macho. So, when an acquisition looms up, few people have the guts to ask:
‘Wouldn’t it be cheaper and better to start from scratch? Will the customers stay if we buy it? Why is it for sale? Why not let it go bust and buy the remains? What else could we do with the money?’
It is important to grasp why an acquisition beats organic development. That reason will define the acquisition and the integration and affect how it is to be managed. For example:
To improve market position – buying a company to increase market share is likely to result in a decision to integrate it fully and realise economies of scale
To acquire specific capabilities or assets – this will usually lead to the integration and restructuring of the attractive parts of the target and possibly the disposal of the rest
To buy a complementary business – if a successful company is being acquired, possibly in a new sector, it may be left relatively intact and only required to report its financial performance in the acquirer’s format. In time there will be opportunities for cross-fertilisation of ideas, processes and people
To turn round a failing company – some acquisitions are to buy a poorly performing company at a bargain price in order to improve its performance and sell it on. Integration will be limited, unless post-purchase investigations reveal more potential and a longer future for the acquisition than expected.
The rationale for the deal is the focus of early work: ‘Why buy this business?’ An adequate answer requires as much salient information as possible at an early stage to build a case for closer contact that may result in formal negotiations and an eventual acquisition.
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