By Jason Rigoli, Principal at The White Oak Group

There is a lot of research that shows less than 25% of acquisitions achieve their intended goals. Typically these goals are financially oriented but are often less quantitative and include qualitative factors such as increasing customer base and broadening company capabilities.

Some strategies to consider when trying to avoid the “winners curse” include:

  1. Develop a core strategy for your existing business. It is hard to target acquisitions that really add value to your company without fully understanding your current business and its existing gaps. Are you covering all the technical areas your customer’s desire? Are you touching all the logical customers? Where are the barriers to entry in your respective industry? Are you protected by those barriers or locked out of an industry segment?
  2. Study the target and develop an “Investment Thesis” that focuses on whether or not the deal will help your company fill a gap and allow you to compete more effectively in your market. Financial synergies are often tough to generate and rarely go beyond eliminating costs related to overlapping back-office functions … the only long-term synergy is an enhanced competitive position.
  3. Start with small acquisitions. There is a lot of research that shows serial acquirers that do a lot of small deals are far more successful than infrequent opportunistic buyers. Most of the hard lessons are learned from experience and it is better to learn those lessons on smaller and less “risky” transactions.    
  4. Map out an integration plan before you buy another company and pay attention to the human capital aspects of that plan. M&A is a disruptive process and it has a real impact on employees. It is best to open up the lines of communication early and let them know your plan for minimizing any pain the deal may cause them individually.

There are dozens, if not hundreds, of books written on executing successful M&A and I have barely scratched the surface. Are there other strategies you have effectively used to increase the likelihood of success on your deal?

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