If your company is about to undergo an acquisition, first of all—congratulations! Secondly, you have my sympathies.
Threading the delicate needle of an acquisition process can be a make-or-break moment for growing companies. And therefore one of the most stressful.
Beneath the surface of these exciting, strategic maneuvers lie a multitude of challenges impacting every role in the organization. For upstream departments early in the product development cycle—design, engineering, procurement, quality, and supply chain teams—the question of how to adjust operations post-acquisition is crucial.
One of the foremost challenges in integrating an acquired company is addressing their existing systems and processes when it comes to not only the larger manufacturing chain but the internal workflows as well. When approached tactfully, both companies in an acquisition are likely to grow operations and revenue significantly, but if done poorly—both could lose time, supplier partnerships, employees, and even customers.
3 Strategic Options for Navigating the Complexity of Acquisition
Choosing how to approach an acquisition can be rife with landmines. The dilemma lies in whether to 1) maintain each company’s processes separately, 2) integrate them into the acquiring company's processes, or 3) a more holistic transformation altogether.
The decision is nuanced and requires a careful evaluation of the potential impacts. Let’s take a closer look at the options.
Path #1: Maintaining Independent Operations
One strategy is to allow the acquired company to continue operating independently. This approach is common in the medical device industry, especially when the acquired company possesses a unique product line and sales team. By letting them operate autonomously, the parent company avoids disrupting established processes, which could potentially lead to lost sales or operational inefficiencies. However, this approach has its downsides. It hinders the optimization of resources and misses out on the benefits of shared suppliers and components.
CONSIDERATIONS:
- Disconnect and Loss Risks: When an acquired company continues to operate independently, there is an inherent risk of disconnects in various systems like ordering, product development, and quality assurance.
- Lost Opportunities for Synergy: By allowing the acquired company to retain its systems and processes, the parent company misses out on potential synergies. These synergies could include shared best practices, economies of scale, and unified branding.
Path #2: Immediate Integration
Alternatively, the parent company could do the opposite: a swift and complete integration (or, ripping off the bandaid!). This involves immediately assimilating the acquired company’s products and processes into the parent company's system. While this method can lead to a unified and streamlined operation in the long run, it is not without significant short-term costs. The immediate integration can result in lost sales, operational downtime, and, importantly, a negative impact on employee morale.
CONSIDERATIONS:
- Operational and Cultural Shock: Migrating the acquired company immediately into the parent company's system can lead to significant disruptions. This includes the loss of time, business, employees, and possibly customers due to the abrupt changes.
- Prolonged Adjustment Period: Given the rapidness and destabilizing effect of this approach, it’s likely this path will take longer for both companies to find their footing and build a strong operational routine. The longer this normalization process takes, the longer growth could be hindered.
Path #3: The Hybrid Approach
The third option is a sophisticated blend of maintaining the acquired company's autonomy while gradually integrating it into the parent company's system. This approach aims to harness the strengths of both entities by allowing the acquired company to retain its unique processes and workflows within the broader framework of the parent company.
The success of this approach hinges on the parent company's ability to be flexible and adaptable, carefully balancing integration with the preservation of the acquired company's distinctive operational character. By doing so, it seeks to minimize the disruptions typical of immediate integration while capturing synergies that a completely independent operation would miss. This method requires a nuanced understanding of both companies' cultures and operational models, making it a tailored, thoughtful approach to merger and acquisition strategy.
CONSIDERATIONS:
- Best of Both Worlds: This approach is a blend of the first two strategies. It involves integrating the acquired company into the parent company’s system while allowing them to retain their unique processes and workflows.
- Requirements for Success: Success in this approach hinges on the parent company's system being flexible, adaptable, and having a high-level configuration to accommodate the distinct processes of the acquired company without compromising efficiency or coherence.
Success in this approach hinges on the parent company's system being flexible, adaptable, and having a high-level configuration to accommodate the distinct processes of the acquired company without compromising efficiency or coherence.
Tips and Strategies for Successful Acquisitions
Whichever path you choose, there are some overarching methodologies to keep in mind as you target a smooth transition.
1. Leverage Synergies for Growth: The acquiring company needs to identify and utilize synergies (such as shared customers, revenue streams, and intellectual property) to enhance growth while maintaining operational efficiency.
2. Balance Integration and Independence: A careful balance between integrating the acquired company and maintaining its operational independence is crucial. This balance helps preserve the unique value and processes of the acquired entity.
3. Partial Migration Strategies: Implementing strategies like rapid integration of critical elements (e.g., top-level saleable products, suppliers, and integration to ERP) can lead to immediate market impact while allowing for gradual full integration.
4. System Alignment and Flexibility: When it comes to the technology you have in place, it behooves both the acquiring company and the company looking to be acquired to implement the most advanced cloud-native capabilities on the market.
For acquiring companies, this would ensure your system can smoothly integrate new acquisitions. Flexibility is key, especially in accommodating product lifecycle management (PLM) and quality systems (QMS) from acquired entities.
For companies looking to be acquired, establishing a modern solution—and therefore more innovative processes—increases attractiveness to potential acquirers and aids in a smoother transition post-acquisition.
Case-By-Case: Real Success Stories
Wondering what all of this looks like in action? The proof is the pudding when it comes to thse case studies.
Imperative Care: A Full Restructuring Made Possible with Flexible Tech
Imperative Care's recent strategic maneuvers in the medtech sector included a full reorganization, including a re-acquisition. As part of a long-term restructuring plan, Imperative Care re-acquired Truvic, a vascular medtech company, who had spun off a few years prior. For this re-acquisition, Truvic needed to be fully migrated into Imperative's systems, which were largely run on Propel Software, a modern cloud-native platform. This complex merger was meticulously planned with Propel's assistance, setting a two-month timeline for preparation and execution. The successful completion of this migration—achieved both on time and under budget—highlights Imperative's adept handling of the acquisition and merger processes as well as Propel’s highly flexible and scalable platform capabilities.
Meanwhile, Imperative simultaneously established the new innovative business unit Telos Health, a startup, allowing Telos to continue operations they’d established in Propel. This decision made it possible for Telos to continue in “startup mode” with the intention of migrating over to more complex processes at a later stage. Read the full story.
ASP's Post-Divestiture Strategy
Following its divestiture from Johnson & Johnson to Fortive Corporation, Advanced Sterilization Products (ASP) faced the challenge of deploying its own technology stack within a year. Under J&J, ASP's quality management was distributed across six disconnected systems, but this transition presented an opportunity for consolidation. ASP aimed to not only match but enhance the "best of breed" functionality of its individual systems in a unified platform, addressing global quality management needs.
Ultimately, ASP chose a combination of Salesforce for CRM, SAP for ERP, and Propel for QMS and PLM. The implementation was a success, including seamless integrations, and consolidating six enterprise QMS applications into this one platform solution—meeting their aggressive one-year deadline. Read the full story.
Savant Systems: Acquisition and Go-Live in the Same Day
Savant Systems, renowned in the smart home and smart power industry, showcased remarkable efficiency in their acquisition of J Geiger Shading, a leader in architecturally conscious shading solutions. The integration was impressively swift – Savant had J Geiger’s products live on their website on the very same day as the acquisition. The seamless transition was facilitated by Savant's interconnected processes in the Salesforce and Propel platforms.
Savant’s fast-paced acquisition process ensured no tangible disruption from a customer perspective, allowing immediate commercialization and distribution of J Geiger’s products. The acquisition not only expanded Savant’s portfolio but also its commitment to providing comprehensive smart home solutions, including the new energy-efficient shading options from J Geiger. Read the full story.
CONCLUSION
When it is time for an acquisition, choosing the best approach for both companies is crucial, and often extremely complex—whether you choose to keep processes separate, integrate them all at once, or a more hybrid, nuanced transformation.
The decision requires a balanced consideration of immediate operational challenges and long-term strategic benefits for all teams involved. Companies must weigh the potential for employee turnover, operational disruptions, and—significantly—lost customers.
When considering a strategic acquisition approach, the impact on the downstream side of the business cannot be overlooked. Marketing, sales, and other commercial teams represent a direct line to the customers, which means they’re more likely to reveal the cracks if something goes sideways.
Here’s the good news: we’re living in an era when software solutions are more powerful than ever. Given easily scalable, role-based interfaces with training baked right in, modern enterprise solutions like Propel Software can serve as the thread that weaves entire organizations together (from product to marketing) during the acquisition process. And they can do so in record time.
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Click to read the second half of this series – The Art of Acquisitions: Keep Sight of Commercial Success.
