From Takeover To Mutual Growth

Chad Lusco, CEO P3 Services.

A traditional model of business acquisition involves the integration of one company into another—much like a hungry cat eating a mouse. But what if you could embrace a new approach toward acquisitions by transitioning your thinking from “takeover” to “partnership and extension of resources”? I find that this extension-of-resources approach can allow both companies to flourish. In this article, I’ll explain how.

1. Negotiate with a relationship-building perspective.

Acquiring a company isn’t like buying a car. Yes, you’ll want to peek under the hood, but the goal should be to develop a positive working relationship. There are ways to make this relationship-building process authentic.

For example, in one instance, senior leadership was skeptical and resistant when I approached them about a potential acquisition. But instead of starting the discussion by pointing out how an acquisition would benefit both companies, I began by listening.

Ask for examples of their challenges. Are they having problems developing their team or expanding their customer base? These discussions can allow you to develop a list of actionable objectives that the sellers value. In turn, you can use this to develop mutually agreeable and beneficial objectives.

There is no such thing as a perfect business. Rather, your goal as a partner should be to align on opportunities and achieve mutual objectives that serve as a foundation for the partnership. I recommend that you ask yourself these questions: How can we structure this deal to benefit both partners? How can both companies coming together provide extended resources and greater success for all?

2. Retain company leadership when possible.

It’s commonplace to eliminate and replace the top management positions in an acquired company with the goal of facilitating better alignment in terms of vision, mission and operating strategies. Yet, leadership elimination doesn’t support the acquisition-as-partnership approach. Instead, it may compromise your efforts to get the companies on the same page. While it might not always be possible to retain the acquired company’s entire leadership team, I believe that retention should be the goal whenever possible.

I’ve found that acquired executives can bring remarkable insight to the table regarding the fulfillment of shared objectives. After all, they know their company best. Furthermore, retaining top leadership positions may help you retain other key employees. According to research from Ernst & Young, about 47% of key employees resign within a year of acquisition and 75% within three years.

Implementing a hiring spree in the months following an acquisition isn’t usually beneficial for either company. By retaining the acquired company’s leadership team, you can provide an invaluable “business as usual” vibe to the transition, reassuring employees that you aren’t significantly restructuring.

3. Follow in the footsteps of multinationals.

Along similar lines, you can look to multinationals for inspiration on retaining talent and preserving the main assets (intangible and otherwise) of the acquired company. Unlike other companies, multinational companies don’t always absorb their overseas acquisitions. For those acquisitions, it tends to be business as usual; they retain a substantial degree of operational freedom and function almost like an independent company.

Why do emerging multinationals take this partnership approach? Quite simply, it’s best for both the acquirer and the acquired. Complete structural integration often has hidden costs, and by offering operational freedom, you can reduce the likelihood of operational disruptions. This improves efficiency and morale.

4. Prioritize company culture.

As previously mentioned, acquired companies tend to have higher employee turnover rates. In addition to retaining top leadership positions, one way to reduce the employee turnover rate (and thereby reducing HR costs and operational disruptions) is to assure employees that you intend to promote a positive, transparent company culture.

In fact, I value company culture so highly that it’s one of the main attributes I evaluate when considering whether to add a company to my company’s portfolio. Culture is significant because people are the main driver of growth in any industry, so you need to support your talent with a company culture that values them.

It’s best to communicate business philosophies, values and ethics before or shortly after the transaction is finalized. If you present values with a collaborative mindset, it can help encourage employees to buy into your company’s mission.

Of course, you may need to tweak the acquired company culture. I’ve found that many smaller companies do not emphasize the creation of clear paths for career advancement within their teams. Team leaders often assume that employees automatically know what their career trajectory could look like and how to move forward.

Make sure to establish clear, consistent communication with our teams. In my experience, most employees crave feedback; they want to know how they’re doing. Negative company culture tends to develop when employees are kept in the dark and treated like cogs in the machine.

5. Invest in your people.

Lastly, remember that a company’s most important asset is its talent. When forging a true partnership, make sure to give your acquired employees and leadership opportunities for professional development as well as the technologies they need for efficient operations.

Empowering employees with the training and technology they need to do their jobs efficiently is one way to demonstrate to them that your company cares about them. Look for opportunities to modernize antiquated processes so that employees don’t waste time on busy work.

Incorporating emerging technology can also serve as a hiring technique, and younger generations may be more apt to express interest in high-tech jobs. I’ve found this approach particularly effective for the trade services industry.

Transform an acquisition into a true partnership.

Embracing an acquisition-as-extension-of-resources approach might not always require a great deal more effort and investment than the traditional takeover approach. It simply needs thoughtful planning and mindful implementation, along with a willingness to collaborate and make adjustments along the way. I think you’ll find that the result is a true partnership of entities working in tandem toward mutually beneficial results.

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