A More Profitable Stategy for Acquisition Integration

With an acquisition failure rate of nearly 80%, a strong argument can be made for a different approach to the integration process. With most businesses, where the public market is not demanding immediate results, a more deliberate slow-and-go approach generally yields better results.

All to often companies make a strategic acquisition but manage the integration as if it were a turnaround situation. Inadequate goals and an overly aggressive integration process driven by a smartest-guy-in-the-room mentality damage the long-term viability and return on the investment.

Nowhere is this more evident than in the differences in M&A strategy between Asia and the West. This article lays out a compelling argument to rethink the old approach for better results.

“So why buy a business and then leave it substantially alone? The answer is that some acquirers often have priorities that are quite different than others. More accustomed to organic growth than to M&A growth, executives at some companies are understandably keen to minimize the short-term risk of failure. Their calculus trades the benefits of immediate synergies for the longer-term advantages of expanding into new and unfamiliar geographies, product lines, and capabilities. Acquirers also gain some breathing room as they learn how to operate effectively in sometimes new and unfamiliar situations. In many cases, they are acquiring a business in a new geography or market, so value creation depends on the stability and growth of the business—not just on broad cost reduction efforts.” Source: A lighter touch for postmerger integration – McKinsey Quarterly – Corporate Finance – M&A

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