Advice for M&A success in 2023
While it didn’t reach the record highs of 2021, 2022 continued to exceed historical levels for M&A activity — PwC even predicted that it would still end up as one of the strongest years on record.
Perhaps this sounds surprising since so many companies cut back significantly on their cost structures due to continued macro-economic uncertainty. However, economic downturns can actually provide opportunities for companies to invest in the right areas, at the right time, in order to emerge stronger after a recession, especially in sectors like technology, healthcare, life sciences and consumer goods.
In fact, the lower valuations and slowdown of IPOs and SPACs is making M&A a very attractive (and sometimes the only) option for buyers and sellers. New opportunities are also presenting themselves to address today’s challenges, including technologies to improve operational efficiency through automation or digital transformation, build supply chain resiliency, as well as be more competitive by creating more dynamic and immersive customer experiences.
Buyers willing to contend with the risks of today’s economic climate are about to see more flexibility in pricing as sellers look to complete deals before the onset of a recession. With an influx of deals bound to happen over the next couple of quarters, business leaders will have to overcome a new hurdle: effectively integrating them into their existing business.
Precisely has made six acquisitions during the last three years alone, the most recent being Transerve — announced in January of this year. This latest acquisition, as well as others including PlaceIQ, Winshuttle, Infogix, and Anchor Point, have brought together companies with complementary capabilities — ranging from consumer insights to wildfire risk data — under one umbrella. While this has been critical in helping to expand our global leadership in data integrity and empowering our customers to make confident decisions based on data that is consistent, accurate, and contextual, it has come with its own set of challenges. Below are what I believe to be the two most critical factors to successful M&A, based upon experiences from our own company journey so far.
A people-first approach is key
For any businesses considering an acquisition, my number one piece of advice is to start with the customer in mind. Whenever we’re evaluating a deal, our first thought is — Will this benefit our customers? What additional value is it going to bring to them?
If that answer is yes, then we next look at the people and the culture of the company in question. We only want to work with businesses that we want to work with, so we place a big emphasis on culture and spend time making sure that any new team we’re bringing in is a fit to our existing one. At Precisely, we are very intentional about our own culture, which is built around our four key values of openness, determination, individuality, and collaboration. It really helped us when bringing new team members into the business by putting the focus on partnership and mutual respect. The acquisitions we’ve made have brought people together from multiple backgrounds, creating opportunities for innovation and for solving customer challenges. Ultimately, we believe that what makes us different, makes us stronger.
If we think a prospective acquisition is both an asset to our customers and a good cultural fit, we then evaluate what roles and talent are available in the organization to help fulfil the strategic vision going forward. It’s important to realize that if you’re acquiring a business, then to some level what you’re really acquiring is the talent of that organization. So, if you’re not evaluating the people element of the equation — both customers and employees — you’re not looking at the deal through the right lens.
After that, we get into the details of how we integrate the brand without losing name recognition. We want customers to be able to easily understand our product suite so sometimes this means renaming solutions to better show what it does, while other times it means keeping their legacy product names.
All of this sounds very basic, but it’s the order of prioritization that makes it key and critical to a successful M&A strategy. You can’t start with the granularity of your products and branding, you have to start with the people who will make it a success.
Communication builds trust
While the intentions might be good, much of the success of an acquisition relies on how it is communicated to both customers and employees. The answer to this is both simple and nuanced: transparency.
Customers and employees — both at the existing company and that of the one being acquired — need to feel like they fully understand the goal of the deal, how it will benefit the business, and, most importantly, how it will benefit them. You have to recognize that you’re asking people to go through a lot of change, and so taking the time to explain the rationale behind the acquisition and why it will be good for customers, and for your team, is critical.
To help ensure buy-in, clear and transparent communication plans need to be established long before the deal is broached. This can’t just be generic boilerplate emails that go out to the full company. Employees and customers both need to feel seen and heard; this is achieved by having conversations in smaller groups, or even one-to-ones, to establish trust. By having a track record of being upfront and open with its customers and employees, a business will be a step ahead when announcing such a big change, especially if the affected parties already feel like the business has their best interest at the center of its decisions.
In summary, it seems clear that, for those prepared to navigate the challenges of economic uncertainty, the first half of 2023 presents an opportune time to take advantage of a buyer’s M&A market. However, a people-first approach, supported by transparency and robust communications planning, will be critical factors in ensuring M&A success.
Written by Josh Rogers.
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