Mergers and acquisitions (M&A) have lengthy been a driving power for firms looking for exponential progress, gaining market share and creating shareholder worth. Historical past has proven that well-executed M&A methods could be transformative and yield spectacular outcomes.
For example, Disney’s acquisition of Pixar in 2006 revitalized the animation big’s fortunes, although market analysts have been skeptical of this transfer when it was introduced. In a dialog with CNBC 15 years later, Bob Iger said it was maybe the perfect acquisition determination throughout his time at Disney. “It put us on the trail to attaining what I wished to realize, which is scale with regards to storytelling,” have been his precise phrases.
However the Disney-Pixar marriage isn’t the one one which proved to be a large progress engine. Fb’s buy of Instagram in 2012 allowed the social media behemoth to dominate the photo-sharing house. There are various such examples within the historical past of companies all over the world.
However all’s not rosy on the planet of M&A. It’s a complicated and considerably dangerous determination, not for the faint-hearted. It’s important to strategy the choice and course of with diligence and forethought.
Through the years, with expertise navigating the difficult world of M&A, together with eight acquisitions in simply the previous few years, I’ve constructed 5 indispensable components to contemplate for a profitable mergers and acquisitions journey.
Be watchful of income synergies
One of many crucial drivers of a profitable acquisition is the flexibility to realize income synergies. Nonetheless, what’s extra vital is to not assume this synergy will robotically happen simply because it appears possible.
Making a choice about consolidated income potential after the M&A entails fastidiously analyzing the potential for progress and gaining clear visibility into the best way to maximize synergy. Take into account buying firms with excessive gross sales velocity and exponential progress potential to maximise success. Analyze the goal’s product choices, buyer base and gross sales channels to establish cross-selling, upselling and market growth alternatives.
For example, in 2015, PayPal acquired Braintree, a funds firm that owned the cellular fee service, Venmo. It was a strategic and clever transfer at a time when digital funds have been simply taking off throughout the globe. Now in 2023, PayPal is counting on Venmo to drive the adoption and utilization of the corporate’s digital funds providers. The 2 operations are anticipated to converge by subsequent yr. This acquisition has enabled PayPal to faucet into the rising peer-to-peer funds market and strengthen its income streams.
Don’t let refactoring throw chilly water in your go-to-market technique
Tech CEOs typically make the error of assuming {that a} product will seamlessly combine into their current tech stack, particularly in a tuck-in acquisition. Nonetheless, this may occasionally not at all times be the case.
Earlier than making your determination in regards to the acquisition, take the time to guage the goal firm’s go-to-market (GTM) technique and the convenience of discovering, shopping for and deploying their merchandise. Deal with creating a brand new built-in model sooner or later to provide your self an extended runway to iron out any points. This permits clients and workers to see a roadmap for future success.
