Recently a group of articles have been published about how Israeli companies that have been acquired have been successes. The successes cited include XIV and Diligence (acquired by IBM) and B-hive Networks (acquired by VMware).
It makes it seem so easy to have a company, sell it and have it integrated into a larger entity successfully.
However, it is not so easy.
The acquiring company needs to find a suitbale company, not only in the area of the solution and the price range, but culturally as well.
From a financial perspective, 50% of acquisitions end in failure by fiscal metrics (though some have estimated this number to be as high as 80%).
When the acquiring company fails to retain the acquired company's staff (especially when the acquisition is for intellectual property), they have paid a lot of money for nothing.
It could be that the acquired company was small and the employees liked working for small companies. The new company, being larger, will not be suitable for them.
A good integration plan will address this issue and others. The acquiring company is spending a lot of money on the purchase, but usally there fails to be a well-defined plan for integration.
These are questions that need to be answered, including:
- Leadership - This needs to be defined to prevent struggles for power both within the acquired company and the purchased entity.
- Accountability - Who is the person/body that initiated the acquistion and is that person/body going to be held accountable? When is accountability measured? How will accountability be measured?
- How does any new product or solution introduced by the combined company advance the current solutions by the stand-alone companies?
- How is communication to the new employees being carried out? Is it bi-directional?
These are just the start for a plan for the integration that will lead to a successful acquisition. How are you planning for and integrating your next acquisition?
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