Growth. So easy to say, yet it’s so hard to do. So why acquisition? Why not grow organically? Why not just grow with your own people, your own facilities, your own culture? There’s many complexities to this answer, but one I will explore in more detail is, how complex it really is and how much time it takes. I worked with a client that had three strong dealerships; all were profitable, but they couldn’t seem to break into new locations effectively. Any of their newer stores couldn’t get off the ground for a host of reasons. Acquisition provided them the ability to gain new, established markets. There are many complexities in acquisition and that’s what this article will dig deeper into.
Options for Growth
Normally there’s three options for growth; organic, new ventures, and acquisitions. Many companies do believe in organic because the growth comes from within. Your current culture, processes, people, etc all are used to develop the new location or product. The drawback is this takes time. Especially in this environment labor is scarce, competing companies have a lot of liquidity. It’s very difficult to break into a new area with the existing headwinds. Next is new ventures, also difficult for the same reasons. That leaves acquisition. Current statistics show that between 70-80% of acquisitions fail. However, we have a good approach to working thru the difficulty of acquisition.
Keys to Success
So back to our client. We embarked on a holistic approach to help them grow thru acquisition. In all acquisition there is the act of making the deal and financing. Those are keys and are critical to having a successful deal. But what about once the deal is complete? This is where most acquisitions fail. Three areas we focus on are people, process, and communication.
People
The first key to success is people. It is paramount to ensure that you have the right leadership in place at all levels. This includes from the director to the mechanic. All levels need to be on board with leaders identified to run their teams and fully integrated into the new acquisition. A key point is that often we will bring in new leaders, and they need to be integrated and accepted (which is often the hard part – more on that later). Then from there, leadership development is equally important. A plan needs to be in place to ensure that a way to develop leaders exists, is documented, and is accepted. And finally, teamwork. This goes without saying, but everyone needs to be on board. Employees will be scared. As an acquirer, you will be seen as a conqueror, as arrogant. It’s important to put the employees at ease. Anything you can do to put them at ease will ease the friction. In our latest acquisition, we replaced over half the leaders. We changed the culture in a few months. People said the were surprised and thankful ho well they were treated. The final point on this is understand that even though you may think their business is like yours, it isn’t. Focus on the people, always keeping in mind that the company is different, and you will have made the first huge step in your acquisition.
Process
Next is process. The key points on process are it needs to be defined, transferable, and integrated. By defined, we mean it’s written down and understood. You would be surprised how many small companies don’t have their processes written down, much less understood. Processes need to be laid out clearly at all levels. That brings up the next point, which is transferable. This might be somewhat basic, but its important to understand that the process needs to be able to be transferred to other employees. It’s not just having it written down but be able to teach it to another employee. And finally, Integration. Integration means have the process, the transferring, and the learning integrated into the company. One key thing we do is have the student become the teacher. It’s important that whoever the processes are taught to, can then teach other employees the process. Integration is key because it creates buy-in. Everyone now is part of the team and learning from each other. It creates an exciting dynamic.
Communication
Let last key to success is communication. I’ve said this before, and I think all turnaround specialists understand this point, but communication is critical. In an acquisition, its almost not possible to over communicate. Communication is where you set the tone, where you are transparent, and where you set expectations. We also like communication to develop at the peer-to-peer level — directors communicate to directors, managers to managers, and mechanics to mechanics. This ties in closely to the point on integration earlier in this blog. If you can develop good communication to your leaders, and then from the leaders to the employees, the acquisition will be on strong footing.
The Acquisition Journey Needs Turnaround
Overall, acquisitions are a complex strategy to grow a company. One of key reasons why they fail is because companies think after the financing and deal are complete, everyone celebrates, and new companies will just be integrated in. The key point to understand is that the journey isn’t complete. The most critical steps now need to begin. This is where the turnaround specialist is most helpful – integrating that new company. It takes integrating not only the company, but the culture, the people, the processes, and finally communication.
Oh and back to that client; they now have over 30 dealerships using this approach.
Maybury Partners, LLC 