What makes a successful acquisition?

How to

Due diligence can make all the difference

Do you want to grow your business?

Organic growth requires searching out new business opportunities, scale and efficiencies. Acquisitions can often be a smarter – and faster – approach, especially if you want to diversify services, add new capabilities or expand geographically.

Acquisitions need to be managed carefully in order to achieve your objectives. Otherwise it could end up being costly for your business and have an impact on your clients and staff relationships.

Establishing a good cultural fit between the two companies is key to the success of any merger.
David Gonano, Macquarie Business Banking.

What makes a successful acquisition? Be prepared to be put in a substantial effort – including research and planning to determine the suitability and match with your existing business.

"Establishing a good cultural fit between the two companies is key to the success of any acquisition," says David Gonano, National Head of Sales for Macquarie Business Banking. "You need to know that the business has been operating efficiently, with healthy profit margins and it has satisfied staff and customers. The business needs to be able to grow in line with your strategy, and potentially provide opportunities for growth through cross-selling. Don't be won over by strong revenue numbers alone.

"On top of this, you need to achieve seamless back office integration between the two businesses. To do this you'll need a comprehensive rollout plan that includes a full induction of all core processes within the initial weeks of the acquisition."

It can help if you've known the business for a number of years and your personal network can often be the best source of potential takeover opportunities.

"When target companies have been identified through personal networks, there is a greater chance the two companies will be more closely matched in terms of market positioning and service delivery, which reduces the time and risk involved in the due diligence and integration."

The quicker you can get to work on developing and implementing your acquisition plan, the better. But that's certainly not to say you should rush both the financial and cultural due diligence phases of the merger. "The merger should meet a set of financial and cultural criteria you have developed for acquisitions" says Gonano.

"You need to let your staff know early," says Gonano. "Tell them why the acquisition is taking place, key milestones of the project and allow them to provide feedback. Explain potential impacts to the structure of the business as well as individual staff roles and leaders."

It's a good idea to get to know the staff of the business you're acquiring, and communicate regularly with them if you can. This way you can ensure they know the potential impacts of the deal and understand their opportunities to contribute to the merged business.

"Retaining good people is a key part of the due diligence process, and it is important to foster commitment to the new business."

Keys factors to a successful merger

  1. Do your due diligence on the business– is there a good cultural fit, have you reviewed their revenue numbers and checked over their financial reports?
  2. Ensure their back-office systems have synergies with your own for ease of integration and scalability
  3. Work up a comprehensive integration plan for key milestones. Assign accountability to staff as part of your plan
  4. Communicate with staff, customers and suppliers right from the start, and try to make it an ongoing, two-way conversation
  5. Don't delay – if you're happy with your due diligence have a clear plan ready, you should now be ready to proceed.
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This material has been prepared by Macquarie Bank Limited ABN 46 008 583 542 AFSL & Australian Credit Licence 237502 ("Macquarie") for general discussion purposes only, without taking into account your personal objectives, financial situation or needs. Before acting on this general information, you must consider its appropriateness having regard to your own objectives, financial situation and needs. The information provided is not intended to replace or serve as a substitute for any accounting, tax or other professional advice, consultation or service.