Setting your company up to be acquired is an art. These kinds of exits can be full of misalignments, hidden obstacles and delays, but they don’t have to be. You can smooth the process by building relationships early on, establishing realistic goals and expectations, using collaboration tools to efficiently perform due diligence, and keeping employees invested in the process. The key is to identify and solve problems before they derail your plans.
All exits have ups and downs, making it tough to keep the transaction on target. Here are some tips to avoid obstacles — or, at the very least, to handle them effectively.
Avoiding strategic pitfalls
Strategic pitfalls are those that occur around misalignment between your company’s goals and your exit opportunity. On paper, things may look fine. But when you get in the negotiating room, you learn that some things are out of sync. Does the acquiring company most value your talented employees your IP, your revenues and/or your customers and market areas?
Operational mismatches
Example: You’ve been focused on opening new markets and expanding your reach, but the acquiring company wants to go upstream and vertically integrate with their products and services.
Financial target mismatches
Example: Your team wants to focus on growth; the acquiring leadership wants to shift gears and draw some profit to reinvest in other projects.
Strategic pitfalls occur when your team and vision take you in one direction, but the acquiring company wants to take you in a different one. These kinds of misalignments should be discussed right out of the gate. Extreme misalignments can be a red flag that maybe this isn't the right fit — and certainly the tension can lead to resentment on both sides, making it harder to work together.
Solution
The key is to establish relationships and open communication between the management teams early on. Spend time getting to know one another in order to develop trust. And build on that foundation by being candid about your goals for the acquisition. Explain how you expect to achieve those goals and any consequences you foresee if you don’t. Leverage your relationship to help you cultivate an aligned vision before you start trying to integrate.
Avoiding tactical pitfalls
While corporate strategic differences should be solved before the acquisition gets a green light, tactical pitfalls sometimes don’t emerge until the deal is complete and integration begins.
Technology obstacles
Example: Your company uses one CRM platform, and the acquiring company uses a proprietary legacy system. As a result, your sales teams can’t share data.
Communication delays
Example: Time can erode even the best deals, and acquisitions already take a long time. Emailing drafts back and forth can be a mess that just makes things worse. Get on the phone or in a room together to work things out.
Burnouts
Example: Everyone gets frustrated with delays. It’s tough to balance the personal sacrifices to keep the deal moving while still doing your full-time job.
Tactical pitfalls occur when you and the acquiring company simply do things differently — particularly when neither side is willing to compromise. While tactical pitfalls are less likely to derail a deal, they can deplete human and financial resources, even cost valuable sales or send talented employees packing.
Solution
To handle these setbacks, you need to manage the project timeline closely and be quick to share updated expectations with all team members and customers, when relevant.
To streamline communication, until technology systems work seamlessly, set up face-to-face meetings between counterparts in the two organizations and share direct phone numbers. Use collaboration tools to co-create important documents in the cloud that can be easily accessed and edited.
You may not be able to eliminate all the speed bumps on the way to a successful exit, but you can significantly smooth out the process by addressing strategic issues before you complete any deal and finding compromises to tactical ones to make integration easier. And celebrate the wins of the newly merged companies to recognize a monumental accomplishment.
Robert Sureck is the Senior Market Manager for Silicon Valley Bank's Southwest region.