The first headline I read this morning was how Engadget’s team are practically all leaving AOL for a new startup, only a few short months after their acquisition. That’s got to sting. Yet, increasingly I see tech acquisitions by big companies falling apart very shortly after purchase. I’ve been through several acquisitions and had countless conversations with other acquirees. Here’s a list of the top five mistakes the purchasing companies make:
#5 Not being flexible
Every single post-acquisition conversation I’ve had has mentioned the same thing: after the deal, the assumptions always change. Transitions take longer, products need to change, integrations are delayed. Unfortunately, deal terms (earn-outs etc.) are rarely flexible enough to match this reality. Result? Remove incentives, add corporate bureaucracy and your team will leave. Solution? If you truly want your team, then make sure your post-acquisition consideration is flexible.
#4 Not appointing a transition owner
Acquisitions get done by having an internal champion on the buyer side. All too often, this momentum disappears the day after the deal closes with the new purchase muddling through internal org structures. At some point (often after raised voices about ‘things not working’), an internal integration person is appointed but not after a lot of (unnecessary) bad feeling has been created.
#3 Not understanding that experimentation is part of the business model
I was once told about a startup which was acquired before several of its games launched. The acquiring company then deluged the startup with quarterly projections requirements (as befit a public company). Protestations that games take time to tweak and grown (not to mention fail) were utterly ignored (and I suspect not even comprehended). The founders left shortly after.
#2 Not understanding that they’ve acquired entrepreneurs
Big companies frequently acquire small companies because they’ve lost the ability to be entrepreneurial. Which means that they have no environment for the entrepreneur they’ve just brought into their stables. One of the mistakes I repeatedly hear about is not sitting down with the founders and creating roles which are customised to their abilities. Make them feel wanted.
#1 Not understanding the importance of culture
Statistically, most billion dollar mergers/acquisitions don’t work. Often the small ones don’t either. Sales-driven companies don’t have the culture to integrate with teams of engineers. This is why transition-driven acquisitions are the trickiest to pull off. Always look at the acquiring team’s management first: if they don’t have a C-level person who understands your culture/industry, you’re walking into failure.
Obviously I haven’t mentioned any names in this post. Although I’m increasingly tempted to write a book on the subject.
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