Global M&A deals reached up to $5 trillion by the end of 2021, with Bloomberg describing one of the tech giants (Accenture) as the “world’s most acquisitive firm” thanks to at least 65 takeovers made over the previous two years. And there’s little sign of this trend slowing down, with Morgan Stanley reporting that all the elements that drove 2021’s record activity remain in place as we move into 2022.
Inorganic growth is an incredible asset to companies looking to expand their reach. I have spent many years helping new businesses scale to billion-dollar enterprises employing thousands of people, with substantial use of inorganic growth. I have seen, firsthand, how M&A can take businesses to heights we never believed possible — but not if we enter into them blindly. For successful inorganic growth, begin with precise intentions and prepared approaches.
Define Motivations With Clarity
Before taking any steps toward a merger or acquisition, it is essential to get crystal clear on your purpose. Why this move? And why now?
There are two main reasons a business might pursue inorganic growth: diversification and synergistic expansion. Both reasons will require a different approach — the company looking to diversify will seek out vastly different collaborators than the company looking to grow synergistically.
For example, when Amazon acquired Whole Foods, it enabled Amazon to diversify its offerings by partnering with a brick-and-mortar store. However, when Proctor & Gamble acquired Gillette, the motivation was not to diversify but rather to improve upon the revenue streams they already had. It was a partnership between two consumer product companies that would increase efficiency and lower costs.
Whether you are looking for diversification or synergistic expansion, gaining extreme clarity on why you want to pursue inorganic growth will allow you to strategize and take the appropriate steps for your company.
Identify a Shared Vision
It’s easy to pop the champagne and throw confetti when you first seal the deal and everything is going well. However, no merger or acquisition I have ever worked on has gone exactly according to plan. I have seen some existing customers turn away from integrated entities for fears of dominance, but then see these be more than offset by new market opportunities from other clients that require the combined capabilities. The nature of M&A is inherently volatile, and there will be surprises. But that doesn’t mean you won’t be successful — it simply means you must find a way to stay afloat during the inevitably tricky times.
Establishing a shared vision between both companies will act as your North Star. In order to identify this vision, make sure to ask the right questions. Why are our companies better together? What do we want to accomplish when we get together?
Once you’ve found your shared vision, don’t simply state it once at the big company meeting and then forget about it. Intertwine every single one of your actions with that vision and use it as your compass. There will be dark days and times when you feel unsure. Turning to a vision the entire team believes in will sustain you long after the champagne has gone flat and the confetti has been thrown away.
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Bring Everything Together To Create a Purpose-Built Vehicle
After defining your motivations and establishing a shared vision, it is crucial to get ahead of potential difficulties by creating a purpose-built vehicle to execute your vision from the start. Success doesn’t happen by accident. You cannot simply stick two companies together and hope for the best. Inorganic growth takes deliberate action and leadership, especially in the midst of all of the variables that arise during and after a deal.
Preemptively and precisely accounting for the costs, energy, and talent required to conduct a successful merger will help you prepare your systems and teams accordingly. Simply throwing a few juniors into a situation and adding a bit of inspiration isn’t sufficient to drive results. Optimism is great, but it won’t get the job done alone.
Of course, it’s no crime to be enthusiastic about a new merger. However, such an influx of excitement without the proper planning in place could have unintended consequences. Furthermore, you cannot get so excited about the merger and the potential possibilities that you expect too much, too soon. You need to give things time and space to play out, allowing employees to connect with new colleagues, innovate, find creative solutions, and make spontaneous connections to work the network.
Like any child, a merger creates a company with entirely new DNA. The culture will change. What’s essential is that you celebrate the recent changes while simultaneously preserving the old elements that matter most.
For example, if a company of 600 acquires a company of 50, it might be easy for the larger company to take over the culture and diminish the features of the smaller group. Or, let’s say a design-oriented company merges with a technology company. You might anticipate a clash between the two opposing cultures. Without proper management, both of these scenarios may very well occur, and the companies involved could lose potentially valuable insights from new team members. Though, if you nurture and embrace the infusion of new talent and ideas, the cultures can begin to intermingle and intertwine, forming a new DNA helix that will foster innovation, creativity, and growth when purposefully guided by clearly defined motivations and a shared vision.
Seal the Deal
Inorganic growth is an endlessly powerful tool that can take your business to places it may never have reached alone. However, a merger will not become successful overnight — but with diligence, time, and effort, you will begin to see the payoff.
Before entering into any deal, set your intentions, identify your goals, and prepare your game plan. Consider utilizing these strategies, and before long, you just might see your business rise higher than ever before.