Of all the various client challenges I work with, post-acquisition integration is fraught with unrealised expectations and lost opportunities.
According to the Business Review (Europe), 70% to 90% of acquisitions fail to realise the intended value.
From my own experience, this is due to several factors:
- Integration programmes are often over engineered, take too long, and heavily geared towards the mechanics of reporting and governance, rather than outcomes. This soaks up considerable time from senior management, who can lose focus on ongoing business performance.
- Many programmes don’t mobilise quickly or adequately enough, jeopardising benefits. Often, three to six months is lost in early planning stages, amounting to lost opportunities worth many millions of pounds.
- Alternative and lucrative opportunities tend to be dismissed at the early stages, as management time gets totally absorbed in delivering short-term benefits and firefighting investor, staff and customer issues.
In larger organisations, benefits are found painfully from elsewhere whilst integration catches up. One major FTSE 100 organisation I worked with undertook the originally intended integration seven years after the transaction took place. Another organisation acquired a business larger than itself, failed to realise benefits from the integration and hit a paralysing down-turn in performance two years later.
Unlock value with a more agile approach
My belief is a more agile approach to integration could unlock more value, deliver tangible benefits earlier and provide management with greater control and flexibility.
Traditionally, a logical but over-engineered programme is planned, ambitiously seeking full integration which becomes an end in itself. This creates a programme of work that is overly complex and difficult to mobilise. This failure to get started costs the company time and absorbs management attention. In the meantime, the pressure to ‘catch-up’ and demonstrate benefits delivery, increases the focus on delivering urgent ’synergies’. This can lead to inappropriate decisions impacting underlying business performance.
Short-term goals for a long-term plan
Instead, rather than having a fully articulated end-state vision, detailed roadmap and robust plan at the outset, initial sprints can be initiated with specific short-term goals in mind. Examples of these include: aligning HR policies, standardising accounting principles and integrating customer communications. The barriers to rapid mobilisation are removed. Integration can commence at pace while parallel teams identify and prioritise longer term opportunities.
The monolithic, all-encompassing integration plan is replaced by a flexible set of imperatives and goals, which management can constantly review, refine and reprioritise. Progress in delivering the integration is clear, with benefits explicit at the end of each sprint. It is easier to take corrective action and re-prioritise to address emerging problems or new business opportunities.
It remains essential that these sprints are undertaken within an agreed framework of integration strategy, intended areas of benefit, and performance indicators such that success or failure can be determined quickly.
Empowering small teams to forge ahead can allow focus on both quick wins, and ‘big ticket’ items in parallel.
Unlocking more value
Taking such an approach, I worked with one organisation who found an unexpected £50m benefit in the combined property portfolio. This benefit took one week to identify, two weeks to validate, and then only six months to realise fully.
Ultimately, successful integration rests on getting the right balance between control and innovation.
Don’t forget with a significant acquisition, you are creating something new. Allowing small teams from different source organisations to work together can significantly increase creativity. Perhaps agile integration is the answer.
For further reading on the subject of acquisitions read our Insight on Post-Acquisition Integration.