Corporate Buyers Should Leave Acquired Companies Alone

Every successful company that has a product or service has a culture of its own that developed around it. Successful companies have found the secret to making their culture function to become one of the leaders in their field, which made them an attractive target for acquisition or merger by corporate buyers.

This is how business is done, and it’s a way for companies to increase market share, improve innovation, or just acquire some top-level talent and intellectual property. But problems arise when the acquiring company tries to assimilate the other company into its own culture.

This is one of the worst mistakes corporate buyers make during an acquisition, and it’s why nearly all acquisitions fail.

If you try to blend the two cultures, you’ll screw up both of them. If you force the acquired company to assimilate, you’ll screw up that company. Different business cultures don’t always work well together. The customer base is different, the policies and procedures are different, as are the methodologies, requirements, attitudes, mindsets, and so on.

It’s nothing more than executive ego for an acquiring company to try to stamp its own personality on its acquired company. There’s no other reason than pure ego to make it happen, but everything would be fine if you just left it alone.

Corporate buyers should leave their acquisitions alone to do their own thing.Think about it. What made the target company so attractive in the first place? Was it the shoddy workmanship, dysfunctional management, and poor attitudes? Of course not, the target company was successful because it was well-run, well-managed, and the company took care of its customers. It was profitable, it had the processes down pat, and it knew what to do to make the other company want to buy it.

So why would you try to mess all that up by making a well-oiled machine adopt a new standard or management style?

Other Mistakes Corporate Buyers Make When Buying New Companies

The fatal flaw in this equation is when you buy the company and make the original owner rich. He or she is no longer emotionally and intellectually engaged in the company. You should probably let them go because they used to be someone who woke up every morning with the eye of the tiger and the fire in the belly but now has a fat bank account.

They probably haven’t given any thought as to which rat to kill, because they no longer have any sense of ownership for the outcome. The owner was no longer emotionally invested enough to keep the acquiring company from trying to stamp all over the new company and make their own mark.

It’s the same when private equity firms buy new companies. They like to buy a small company, load it up with debt, even while making the original owner independently wealthy. The company just becomes a debut mule for the equity firm as a way to make all their other companies profitable. As a result, the new company will soon fail, which allows competitors to take over the market share and become the new big and profitable company in the industry.

Again, the owner wasn’t there to worry about credit scores and debt ratios. They let the private equity firm screw it all up for the sake of a few million dollars, even as they ruin the lives and careers of dozens, if not a few hundred, employees.

You don’t know how many times I’ve heard, “We’ve made an acquisition and nothing is going to change,” only to see the acquiring company make changes like high tide sweeping over a sandcastle.

It happens every time because the owner didn’t have the same intellectual ownership and emotional investment about the outcome. Or because the acquiring company felt they wanted to put their brand on their new toy. Or both.

As a result, between 70 and 90 percent of all acquisitions fail because the acquiring company tries to integrate the new company into their existing model, shoving a perfectly good square peg into a round hole.

If you want to make an acquisition successful, follow these two steps:

  1. Buy a company.
  2. Leave it alone to do its own thing.

That’s it. Don’t change it, don’t make your two companies work together, don’t impose your bureaucracy on the small startup, don’t make the staff comply with a dress code, or make them follow your 9-to-5, 2-weeks-of-vacation model if they were already making millions of dollars by wearing jeans and t-shirts, working remotely, and taking vacation days as long as their work was getting done.

Treat your new acquisition like a conglomerate holding several independent companies. Just let them do their thing and collect the profits. That’s all you really wanted in the first place.

Don’t try to force things to make your merger work. It won’t work. Your efforts are doomed to fail. You won’t be the special one. You won’t defy the odds. Because the odds are 70 to 90 percent that you’re going to screw it up. Leave your new company alone and let them do what they’ve been doing to make your company even richer.

I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own business, including pivoting within their industry. If you would like more information, please visit my website and connect with me on Twitter, Facebook, or LinkedIn.

Photo credit: Geralt (Pixabay, Creative Commons 0)

Author: David Marshall
I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own business. If you would like more information, please visit my website and connect with me on Twitter or LinkedIn.