As Suzzanne Uhland has previously asserted, mergers and acquisitions can get really tough and challenging. In fact, many companies, irrespective of whether they have previously undergone this process, often experience more difficulties—and even fail—simply because they firmly assume that such experience will get them to safe haven. Reality, however, dictates otherwise. Integrations are complicated, highly time-consuming and even potentially detrimental for any business.
Nonetheless, the whole conception about mergers and acquisitions is really positive, as businesses want to grow and perhaps one of the best ways to doing so is by seizing the perks of joining forces with an already well-established company. Thus, the processes become as a crucial driver for growth. But, as said in the previous paragraph, that is by all means much easier said than done—it is a tremendously challenging process.
Today’s corporate landscape provides a lot of insights about how companies often approach both mergers and acquisitions. Thus, here are some of the most traditional mistakes businesses make when trying to embark themselves in such endeavor:
Believing that previous mergers and acquisitions experiences give the company some advantage
Many companies and managers seem to agree upon the fact that experience is key. In fact, they believe it adds to some extent value. Of course, under certain circumstances, it does; but when it comes to mergers and acquisitions, companies seem to be more likely to experience more difficulties during their second mergers and acquisitions process. Why? Well, humans, by nature, tend to overlook details when they are used to something. Thus, when a company has already undergone something like the process depicted in the title, it tends to believe that the second time will go as good as the first one simply because the latter went well.
What companies also overlook is the fact that each merger is different, even when it takes place within the same industry, country, culture, etc. In fact, the aforementioned aspect is key: when companies have decided to undergo a mergers or an acquisition, they have got to pay special attention to the kind of people and culture they will be dealing with, as many aspects vary from company to company depending on the culture under which they operate. A successful merger is quite remarkable; however, even though it worked the first time, it does not necessarily mean it will work a second time and that things are going to as seamless as before
In short, companies could wind up going southwards and learning the wrong lesson from such experience. But how can companies avoid falling victim of believing that their second merger will go as good as the first one? Well, simply put: acquire assorted talent. In order to reduce the risk associated with both mergers and acquisitions, companies should strive to acquire talent with different experience and capabilities. Or, better said, combining fresh employees with experienced corporate employees is likely to develop in a good sense the staff.
Besides, it is particularly important to keep track of every little detail and lesson during the whole process the company gets involved with. Thus, the business can make any adjustment as it goes along instead of inexorably crashing. It is really wise to pay special attention to what went well and what went wrong during previous experiences.
Do not follow those who dictate movement
The vast majority of today’s executives pay special attention to mergers and acquisitions when they have enough capital to invest. That, in fact, is why mergers tend to happen more often when the stock market experiences a sudden spike. When stock prices are abundant, shares become the most common currency to carry out any sort of deal. It is like practically experiencing the necessity to spend money on something. Nevertheless, such argument, under those conditions, is even compelling until businesses realize that the businesses they are interested in are also benefiting from the same juncture. Thus, it is not rare to see that prices are much higher—mostly because companies start acting crazy.
And, just like companies, the people behind them, CEOs and boards of directors, are open to falling into such trap: seeing competitors acquiring companies adds pressure to their growth plans, and they start doing businesses that, under different circumstances, would not make any sense at all. Such environment often creates another conception of what has been traditionally labeled as «normal». Be that as it may, it is quite important to resist the urge of following the market during those circumstances, for the risk of experiencing a no less than challenging time is really high. Strive to remember the rationale behind every decision of the same nature: evaluate prospects, buyers, possible partners, etc., calmly. But, even more important than that, the following question has to always be above everything: how can the company manage the possible downside risk?
* Featured Image courtesy of Pixabay at Pexels.com