Parking the tanks on the lawn is not the best way to start an acquisition
You won’t be surprised that the main steps taken by companies when making an acquisition includes some navel gazing in the first place, to establish the need.
This is followed by scanning the market to identify appropriate acquisition opportunities. Then, of course, due diligence of the target company takes place.
But there is another key step that, in my experience, does not get enough attention. And that is surrounding what happens after the deal goes through.
Should you approach an acquisition by bringing your ‘tanks onto the lawn’ very early on, in other words to take early control? Or do you phase it in?
Every case is different. If the acquired company is in crisis for example, then remedial action is of course necessary. But if it’s not, then in my experience, a phased blending in is more ideal.
Bunnings Group is an international household hardware chain. The chain has been owned by Wesfarmers since 1994 and has stores in Australia and New Zealand.
Having recently purchased the Uk-based Homebase chain, it is now faced with one of the biggest acquisition failures in retail history.
Very soon after buying the company, it arrived with ‘tanks on the lawn’. It fired the senior management team and about 160 middle managers.
It also changed the product mix, which resulted in alienating the core female customers of Homebase. Arriving with tanks on the lawn was a big mistake. I was reminiscing before Christmas with Mark Byrne, the finance director of Triangle. He was behind the purchase of Switzers by Brown Thomas back in 1990 and was part of the exec team that invited me to help with bringing the two businesses together. It was a very successful acquisition and here are some of the steps taken at the time. 1 “The first rule is to wait, observe and learn before rushing to make changes. While you may have studied the business for many months from the outside, it is only when you take control that you really understand how it works. Don’t be arrogant. The acquired company may be able to teach you something, as you bring your expertise to them. Talk to the existing management, don’t assume that they have nothing to contribute,” said Byrne. 2 During the post-acquisition investigation, determine if the new company should be absorbed into the acquiring company, or if it should continue as an autonomous unit with no direct involvement from the new owner. 3 If it’s the former, there will undoubtedly be some overlap and opportunities for synergies. At the very least, that’s likely to include cost savings on shared back-office services, such as finance, IT and admin. “We merged the finance department in the first three months, but it was two years before the buying functions were merged,” Byrne added. 4 Most importantly, talk to customers and talk to the teams of the acquired business. It’s important to understand their concerns and allay them. You need to engage them for continuity. Making an acquisition is clearly a big deal and should be approached with great caution. Take time to put a well-considered plan together for post-acquisition. There are so many variables that only time will tell the best answer. Even if you have a great plan, don’t be surprised if you need to change it as you continue to learn. Alan O’neill, author of is managing director of Kara Change Management, specialists in strategy, culture and people development. Go to www.kara.ie if you’d like help with your business