The Holy Grail of Acquisitions

The Holy Grail of Acquisitions

The perfect integration.
Yes, that’s the Holy Grail.
It’s a quest every acquirer embarks on.
Yet very few prevail.

What starts with a vision of seamless, spirited collaboration in pursuit of treasures and bounty between those known previously as buyer and seller too often ends with finger-pointing, disappointment, and the departure of frustrated clients and alienated employees. The goals of increased profits, revenues, and backlogs blended with reduced staff turnover and enhanced employee engagement are too frequently sabotaged by mismanagement, lousy communication, hidden agendas, defensiveness, and passive-aggressive behaviors. But it doesn’t have to be this way.

With now two years of data from our Excellence in Acquisitive Growth Awards series, we can confidently say the Holy Grail of acquisitions can be achieved—and regularly so. But it takes discipline, know-how, and practice. 

Integration and ancient Greek philosophy: As well-known AE industry consultant Aristotle said in his weekly newsletter Word from the Acropolis, “We are what we repeatedly do, therefore, excellence is not an act, but a habit.” So, it should come as no surprise that many of the industry’s most prolific acquirers possess the secret sauce that creates successful integrations. The results from our Best Post-Transaction Performance Award applications speak for themselves: 

• The best acquirers know how to increase profits: 95% of acquisitions by applicants resulted in an increase in profits within one year of the transaction being completed. The median reported profit increase was a robust 78%. About one-third of Award applicants reported profits at least doubling in the year after a transaction. 
• They make a habit of boosting sales through their acquisitions: One of the big lessons learned from the two years of performance data is the ability of acquirers to ramp up the fee backlog attributable to their acquisitions. Three-quarters of acquisitions resulted in an increase in backlog, with the median reported uptick being 28%. Twelve percent of acquirers reported backlog more than doubling a year post-transaction. 
• They are 100% growth-focused: The median reported increase in revenues one year post-transaction was 22%. Almost all (95%) Award applicants reported an increase in revenues one year post-transaction. Eight percent of applicants reported a doubling or more of revenues. 
• They excel at employee engagement: Acquisitions are an excellent way to boost employee morale and engagement. On average, acquirers have been seeing voluntary turnover rates decline by almost one-fifth a year into their transactions. One reason for this is that most acquisitions are creating more opportunities for employees post-transaction. Another is that acquirers are bringing improved benefits to employees at a lower cost to them.

The secret integration sauce revealed: What are some ingredients of that secret integration sauce? Here are just some direct quotes from those who repeatedly achieve the Holy Grail of successful integrations:

• “We prioritized cross-selling their expertise into our historically target markets.”
• “We invested in and enhanced their marketing deliverables and capabilities.”
• “We intentionally and immediately pursued work-sharing across our geographical footprint.”
• “We quickly transitioned the firm to our ERP system, project management training and controls, and injected smart and strategic investment dollars into the operations.”
• “We boosted organic hiring efforts to capitalize on a strong and growing backlog.” 
• “We expanded their technical resource pool, allowing them to pursue, win, and deliver larger projects.”
• “We deployed our best-in-class employee retention and training programs.”
• “Where previously there was pretty much zero communication, we proactively and regularly talked one-one-one with key folks and initiated monthly communications to keep everyone apprised on everything that was taking place in the transition.” 
• “We integrated key client and technical focus area leads together so that together we could deliver the best resources to win work together that neither of us could do individually.” 
• “We brought in our PM training program. They did not have one before the acquisition. Their PMs loved it. And project performance increased—not overnight, but within the first six months.”
• “We eliminated unnecessary overhead.”

Lessons learned: Four things strike me when reading these quotes from these very successful acquirers. First, there is nothing radical here in terms of management or ideas. Second is the intentional focus on making the necessary investments (in systems and people) to create opportunities for the combined firms. A “hands-off” approach is never contemplated, while pursuit of cross-selling opportunities—resulting in quick and meaningful “wins”—is imperative. Third is the commitment to communication—at a company and individual level. There is no place for a vacuum in a successful integration. And fourth is making the changes that are necessary to improve performance. This requires managerial know-how, toughness, and a vision for how things can be better.

Behind the scenes: What you do not see in these quotes is the extraordinary planning and research and screening done by the corporate development teams of these successful acquirers. Nor do you see who the “we” are—the folks on the ground, from both buyer and seller—executing the plan put in place for the integration and adjusting it as needed. 

Perfect integration is achievable. Don’t let the naysayers tell you otherwise. They have an agenda. Don’t let it interfere with yours. 

To contact Mick Morrissey, email him at [email protected] or text him at 508.380.1868.