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Successful M&A Requires a Clear Vision

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By Bob Barker

An astute CEO can augment organic growth with acquisitions. While a clear vision is required for any growth strategy, M&A demands a high level of clarity that many companies fail to achieve before launching an initiative:

“Much has been written about acquiring companies’ failure to realize the value they envisioned for their acquisitions and the why’s: a lack of proper due diligence, cultural mismatch, lack of integration planning, unforeseen market factors, etc. However, of all the possible reasons for failure, M&A experts put the lack of a clear vision at the top of the list.”

                                                Source: “Creating and Executing a Winning M&A Strategy,” Merrill Data Site and The M&A Advisor, October 2013

A majority of acquisitions fail to deliver the expected returns. CEO Carol Koffinke of Beacon Associates, a merger advisory firm in Bel Air, Maryland, says that “60 to 80 percent of all mergers and acquisitions fail to meet their merger goals.”

Why do companies launch into an acquisition without adequate preparation? Three key reasons for insufficient vision and planning recur in my work with top executives:

  1. A CEO can be overwhelmed by the daily pressure of running the business. Periodically answering the question “are you working on or in your business?” can prevent the urgency of daily concerns that distract from the CEO’s paramount responsibility –  increasing shareholder value.
  2. Pressure to make quarterly goals can diffuse the shared view of a company’s purpose. A process called business entropy (e.g., repeatedly accepting non-core business) can eventually dilute the strength of a company’s brand and slow its ability to generate new business.
  3. Some CEOs don’t naturally think strategically. A CEO who’s risen through the operational ranks can end up with a “make stuff, sell stuff” philosophy and a view that strategy is merely a set of slides for board and investors. Good strategy drives profitability.

How can a CEO be more intentional about growing the company?

  1. Find a way to set aside time to think and discuss new directions. In the social media world we live in, it’s easy to develop a chronic short attention space, but focus is required to create breakthrough strategies.
  2. Take an honest look to make sure you’re not hanging onto more than you should. How to cross the second chasm, i.e. growing a company from small to big, is defined in Doug Tatum’s excellent book, No Man’s Land Pick up a copy and read it this weekend.
  3. Discuss growth challenges with objective, experienced outside advisors. Use CEO peers at Vistage and experienced consultants as soundingboards to help call out any “elephants in the room.” They can help you establish the clear vision needed to drive your acquisition initiatives.

For 30 years Bob Barker was a software industry senior executive who created partnerships, formulated product strategy, and executed acquisitions for billion-dollar companies and startups. As a trusted CEO advisor with 20/20 Outlook LLC, he creates breakout strategies and growth-accelerating partnerships for visionary CEOs. http://www.2020outlook.com/blog/

 


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