Eight lessons from eight real-world acquisitions
Knights plc has successfully completed eight company takeovers since 2011. CEO David Beech has led every one. He knows better than most that when you fuse two organisations, you play with fire. If the management team doesn’t know what it’s doing, the merger becomes unpredictable. The results…an out of control situation which will impact both your new and existing teams.
Certain effects are guaranteed – no matter what you do: anger, fear, and a clash of cultures will all occur. Whether you jump those hurdles and emerge smiling in the sunny uplands depends on many things, starting with how well you manage the integration.
In this article, David shares the eight critical lessons he’s learned during his eight cultural integrations.
Lesson 1: Make cultural integration your absolute priority.
Here’s fact number one: buying a business is easy. Culturally integrating it is fiendishly difficult. Therefore, the two organisations must be a good cultural fit to begin with. If not, the risk of failure is too high; no matter how impressive the strategic and financial benefits look on paper.
The important thing to remember is this: the value of any merger comes from the success of the eventual integration. It doesn’t stem from a great transaction process or from creating an excellent plan on a spreadsheet.
Once you’ve ticked the ‘good-cultural-fit’ box, you can start to plan. But cultural integration must always be your starting point – right from the very first conversation.
Lesson 2: Send in your most-senior people.
Put key members of your senior leadership team into the new business immediately. I always enter the new company on the very first day after the deal has been secured. You can’t outsource the management of this process and you definitely can’t oversee it using email.
Put people with high emotional intelligence in charge of the integration. It’s a tough job. Your newly acquired staff will be experiencing a maelstrom of feelings. The leadership team must, therefore, act intelligently to help their new colleagues to ride the emotional curve.
With our different acquisitions we’ve tried sending in one person and we’ve tried sending in six. To integrate around 50 people, we’ve found that you need three to five leaders on the ground; especially after the initial ‘anger’ phase – more on that below.
Lesson 3: Expect staff churn.
Some people from the newly purchased business will leave. It’s inevitable. Recruitment agencies will also pounce, exploiting the change of ownership. So, plan for short-term losses and try to work out what those losses will look like.
Lesson 4: Learn the subtle art of emotion management.
The people coming into your business are on an emotional journey. It starts with anger and shock, progressing to disappointment and negativity. Finally – if things go well – they become positive, letting go of the past and embracing the future.
Your senior team must marshal the team through this roller coaster. For the first few weeks, you listen to anger, soak it up and empathise. During this stage, it’s crucial to absorb, not push back. Don’t move too fast and don’t thrust your vision upon them. They’re not ready. We learned this the hard way.
It is vital that the integration-management team, don’t take the slings and arrows of anger personally. Stay strong. Sucking it up is tiring but temporary. Do the right things and – if the acquisition was a good one – the sun will shine through the dark clouds in a few months.
Lesson 5: Understand the different phases of integration.
If managed well, the anger phase dissipates after two to three months. At this point, you should gently turn the focus towards the future. Your new colleagues will start to let go of the past and become inquisitive about what’s to come. So, give them a taste of what’s ahead.
Remember however, that people will always travel through the emotional curve backwards as well as forwards. It’s not a constant movement in one direction. Sometimes you’ll see happy people by day two, but by day seven they’ll be low. They will fluctuate.
In summary, our experience is this: the anger phase lasts up to three months. Next comes a gentle ‘embrace the future’ stage – a transition lasting around another three months. Finally, in months seven and eight, you reach the ‘evangelising’ phase which is when you can fully share your vision.
Lesson 6: Change the name quickly (but not too quickly).
Changing the name of your new company is secondary to cultural integration, but it plays its part. We’ve tried fast name changes, we’ve tried doing it after three months, and we’ve tried waiting much longer. For us, three months works best.
First, we get the new staff working on our IT system, using the same processes and technology. We do that after two months because it takes that long to transfer over their live work. On the first day of the third month, they’re working on our system. At that moment, we change the name.
Why so fast? Because if you wait any longer you will hold them back on the emotional curve just as they are readying themselves to take the plunge.
Lesson 7: Build the foundations for full integration.
You need to do three big things if you are to start to change the culture of your new staff and to bring their behaviour and habits in line with what you want.
First, as we’ve seen, you embed your most senior, most emotionally intelligent leadership team in the heart of the new company. By sending in your best “culture carriers”, your new colleagues start to learn the new culture as it is being clearly modelled around them.
Second, after four or five months you bring in other players – more people who live and breathe your culture. That mixes things up, which helps you move on to the next phase.
Third, you change the office environment. Relocating to a new building works best because it offers a blank canvas. This new place will have your company name on it and will provide a new environment, perfect for finishing off the integration. However, if relocation is not an option, you’ll need to change the office, so that it’s obviously part of your company.
Lesson 8: Embed the new culture.
Once you’ve survived the emotional curve, introduced new working practices, and changed the office environment, you will need to embed your culture. You can’t rush this process, so be patient, relentless, consistent, and straightforward. Make sure people understand why you want them to behave as you ask. Explaining the ‘why’ is vital to turning your culture into a concrete, tangible part of the newly acquired business.
To conclude.
Over the past eight years, we’ve learned eight lessons on how to acquire and culturally integrate a new business. Everything you read here comes from those real-world lessons.
To finish, I’ll return to lesson one. Cultural integration is the most crucial element of any acquisition. Fail at that and the merger fails full stop, creating a dysfunctional new family fraught with problems – rather than a happy and united new team. So, it pays to start from a strong place. Acquiring a company that’s poles apart from your own culturally is, in my view, a non-starter – the organisations must be well suited to begin with. Next, prioritise cultural integration, taking into account everything mentioned above. Do that well and you’ll have every chance of success…