Skip to main content
Blog Post

Lessons we can learn from serial acquirers

Mergers and Acquisitions
Mergers and Acquisitions

By David Hunt | October 4, 2019

Serial acquirers practically have M&A down to a science, so newcomers to dealmaking can learn from their best practices.

Almost any large company today has a history of — and a future in — mergers and acquisitions. Whether it’s to acquire new skillsets, consolidate an existing position or expand into new industries, a successful M&A deal can be a relatively quick way to transform a business. However, if a deal fails it can also be a very expensive mistake — and become legendary, as we know from many commonly-known M&A disasters.

So, what’s an acquirer to do?

For one thing, they can learn from the best serial acquirers and in 2019 we have many examples of companies that handle M&A like pros. The following are some examples of my observations and existing research as to what some of the key takeaways from these top tier dealmakers are:

  1. Develop an in-house capability

    Rather than being reliant on external corporate advisors, once a corporation has a number of deals under its belt — and if the business strategy entails continuing on an inorganic growth path — it’s a good idea to start internalizing these learnings and developing a consistent approach to M&A. Not only does this save time and resources in the long run, it enables companies to continue to sharpen their focus on deals, getting better at knowing what constitutes a realistic target, and anticipating issues earlier on. With an internal deal team in place, companies can utilize external advisors for specific technical or location expertise and to help when volume rises.

  2. Understand the bigger picture

    In the past, companies could create true “conglomerates” on standalone industries, investing in a range of unrelated sectors and building a broad base of operations. This made it very difficult for any one person to understand the total picture of the company.

    Today, information has permeated everything, and transparency is no longer a word we use just to talk about windows. When companies build internal expertise or work with consistent advisers, it allows them to see the bigger picture of how industries relate together and how combining separate businesses can make the sum better than the parts.

  3. Apply technology and other commonalities across all platforms

    In a related point, the use of technology is key. Even when acquiring across disparate segments, technology can be — and often is — a unifying factor. Often, with thought and vision, a fundamental technology platform acquired in one segment can be used across other consumer bases or supply chains.

    The same applies to other structures and knowledge bases, including marketing, advertising and sponsorship strategies — to a certain extent, these can all be replicable processes, and continually developed and improved with each transaction.

  4. Harness synergies, but be careful of over-reach

    While most deals today are meant to transform a business rather than expand into new areas, there are exceptions. A recent example is the mega-merger between SAB Miller and InBev — a deal that combined more than 400 drink brands. These acquirers can harness great synergies, but only up to a point.

    The realization of synergies must be balanced with maintaining what made the acquired company a successful business in the past. Careful consideration must be given regarding what synergies to focus on as well as the timing to achieve them. You do not want to destroy value in the acquired company in the pursuit of a phantom synergy. However, there are times that the combined company will destroy parts of both itself and the acquired company in order to achieve greater synergies and an increased combined value post integration.

  5. Look after all of your people, hired and acquired

    People are almost always the key to the success or failure of an M&A deal. After a transaction, successful acquirers will continue to listen to their employees, both hired and acquired, and ensure that they are all being brought into the overall organization’s employee value proposition.

    The search for “fresh blood” means that in some sectors, especially those that are already close to being oligopolies, there is a massive imbalance in power and culture between the huge acquirer and niche targets. We can see this in the drinks industries, where Anheuser-Busch InBev has targeted tiny microbreweries, and in technology, where Facebook has acquired smaller competitors such as Instagram and WhatsApp. The cultural imbalance in the latter saw the founders of both Instagram and WhatsApp leave Facebook.

Putting it all together

The key is to understand and be open about why you are buying an asset and whether you want the people, or, you want the technology. Culture is key — two relatively equally sized companies coming together is very different than a large company buying six people in a start-up or a microbrewery.

In some cases, combined companies A and B to make an improved “second generation” company C, especially by adding on new legal and risk processes and improving technology will ensure that the combined organization will continue to grow. A less ambitious merger strategy might merely involve applying company A’s processes across the combined entity. Ultimately, both strategies can work. The key is to be honest about what you are going to do — and then do it.

Author

David Hunt
Senior Director of Mergers & Acquisitions at Willis Towers Watson

Contact Us
Related content tags, list of links Blog Post Mergers and Acquisitions Mergers and Acquisitions