Title: Critical Steps for Mastering Successful Acquisitions

Two Critical Steps to Mastering an Acquisition

In today's business environment, sophisticated organizations often consider acquisitions as integral parts of their growth strategy. Proactively pursuing and executing transactions, they invest in building capabilities that allow for efficient execution while driving value from target companies creating a competitive advantage.

However, despite the high flure rate in mergers and acquisitionsestimates suggesting anywhere between 70 to 90, according to Harvard Business Reviewan allure persists. This allure comes from the potential to accelerate growth objectives by leveraging resources or entering new markets through acquisition that might not be achievable internally.

But can this high flure rate be overcome? With so many steps involved in an acquisition process, two often overlooked yet vital stages significantly impact its success: defining a well-aligned acquisition strategy and ensuring effective integration post-transaction. These book , setting the stage for strategic alignment with business objectives and determining overall value capture.

Let's explore these critical steps:

1. Defining Acquisition Strategy

   Successful organizations take time to define an acquisition strategy that closely aligns with their enterprise goals. This involves not only establishing clear objectives but also understanding where added value can be derived. Leadership must clarify why the company is pursuing acquisitions and how they believe these transactions will create value.

Most acquisitions fall under five primary strategies:

• Scale Enhancement: To increase size, market presence or operational capabilities.

• ProductService Expansion: For diversification into new products or services.

• Geographical Expansion: Entering new geographical markets for access to customers, resources or opportunities.

• Diversification Risk Reduction: Reducing reliance on specific market segments through varied operations.

• Competitive Advantage: Acquiring companies with superi, skills, or reputation.

A well-defined strategy encompasses these elements:

1. Why - The strategic purpose behind acquiring a target and the expected value creation post-acquisition.

2. How Much - The financial commitment, including deal valuation, organizational resources and objectives.

3. How - The optimal approach to integration for minimizing risks and maximizing synergies.

Understanding these components ensures acquisitions are not pursued impulsively but strategically, reducing the risk of overpayment and ensuring alignment between the organizations post-transaction.

2. Effective Integration

   Integration is often seen as a challenge that can't be overlooked, nor expected to occur naturally or overnight. Merging two distinct entities requires navigating compatibility while preserving value drivers and minimizing disruptions. The key lies in aligning acquisition strategies with integration goals:

Partnering Approach: Mntning separate structures post-acquisition preserves unique strengths and cultures for growth synergies through learning and collaboration.

Combining Approach: Integration involves merging operations to reduce costs, eliminate redundancies, and achieve immediate efficiency gns from synergies identified during due diligence.

Transformative Approach: A more holistic view of both organizations is taken. This approach redesigns the business model considering people, processes, and technology to create new growth opportunities while preserving core assets.

The appropriate integration strategy deps on the acquisition goal:

Acquisition Strategy Integration Approach

Scale Enhancement Partnering

ProductService Expansion Combining

Geographical Expansion Transformative

Diversification Risk Reduction Combining

Competitive Advantage Transformative

Successful execution requires a detled review of specific facts and circumstances by professional advisors. Aligning strategy with the right integration approach, along with careful target research, rigorous due diligence, and savvy negotiations, forms the foundation for achieving growth through acquisitions.

Navigating from strategy to success in acquisitions involves discipline and investment in time and resourcesyet, with the right guidance and commitment, organizations can overcome challenges and achieve strategic objectives effectively. For further insights on this topic, contact John Cavalier or your service team at Cohen Company.

Cohen Company does not rer legal, accounting, or other professional advice. Any actions taken based on information in should be reviewed with specific facts and circumstances by professional advisors.

About the Author:

John Cavalier, MBA, MAcc

Partner, Management Consulting

[email protected]

216.774.1199
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