Four Ways to Bring Significant Value to an Add-On Deal
Add-on acquisitions are more popular than ever, but they present a serious conundrum at integration. While deal partners may talk of synergies and cost savings, there may be little factual basis on which to identify what and whom to keep. Each company’s financials offer a good overview of operational capabilities, but many other tools offer better insight into integration and growth opportunities.
Add-ons have historically been used to promote inorganic growth, offering an immediate infusion of revenue to an existing platform company. In most cases, you’re purchasing intellectual property or market share that offer more cash and a chance to edge out competitors.
Here are four key areas that offer valuable growth from an add-on:
Know the Culture
When merging two different companies, you must know the corporate culture of each. Cultural fit issues are the most common reason mergers fail. It’s important to identify areas of cultural fit and shared values. Areas of possible difference are equally important to understand. The most successful mergers take the most appealing aspects of each company’s culture. Ideally, your staff’s lives should be better following the merger, and your customers should notice a positive shift in cultural change. A more restrictive working environment, fewer benefits, less pay, and a de-emphasis on customer needs are all cultural shifts that can add up to disaster.
Know the Brand
When you acquire a brand, you must have a clear understanding of the value it offers. This is doubly important if you anticipate a rebranding effort. Companies too often rebrand, only to find that the discarded brand had greater loyalty and more market penetration than the new brand they haphazardly implemented.
Know the Team
When you merge two different operations, you must determine who has the strongest and most compelling customer relationships before moving people around. The strongest players aren’t necessarily the most highly paid or respected. Instead, look at relationships and results, then plan accordingly.
Be Inclusive and Fair
The merger should make everyone’s life better, so if staff or customers feel you’re being unfair, you’re in for a rocky ride. The integration team should include vested, knowledgeable, committed players from both entities. The process should not be one size fits all. It’s equally important to recognize the value of diversity. The perspective of a single race or gender cannot possibly take into account all perspectives. You need people from a wide variety of backgrounds, or you’ll miss important information and could make costly mistakes that can lose customers. Work toward consensus, not authoritarianism, in your change-management approach.
About Madison Street Capital
Madison Street Capital is an international investment banking firm committed to integrity, excellence, leadership and service in delivering corporate financial advisory services to publicly and privately held businesses.
Over the years we have helped clients in hundreds of industry verticals reach their goal in a timely manner. Our experience and understanding in areas of corporate finance and corporate governance is the reason we are a leading provider of financial advisory services, M&A, and valuations. With offices in North America, Asia and Africa, we have adopted a global view that gives equal emphasis to local business relationships and networks.