Due diligence cannot quantify a team's crucial soft skills. When an acquirer forces change aggressively post-close, they risk an exodus of these skills and key talent, maximizing the chance of the investment failing. A partnership approach that preserves talent for at least the first year is a much safer strategy.
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When a large company acquires a startup, the natural tendency is to impose its standardized processes. Successful integration requires a balance: knowing which systems to standardize for leverage while allowing the acquired team to maintain its freewheeling, startup-style execution.
Veteran dealmaker Andy Cohen argues against a "win-at-all-costs" mentality in M&A. True success, particularly in tech deals where talent is key, comes from ensuring the acquired team feels the outcome is fair and their future is promising. If one side feels they lost, the integrated entity will fail.
To ensure Day 1 alignment and retain key talent, treat integration planning as a collaborative process. Share the developing integration plan with the target's leadership during due diligence. This allows them to validate assumptions, provide critical feedback, and feel like partners in building the future company, rather than having a plan imposed on them.
Successful large-scale acquirers remain nimble, flexing their own processes to suit the acquired company rather than force-fitting it into a rigid corporate structure. This preserves the culture and talent that made the company valuable, preventing value destruction and keeping the new team engaged.
Many M&A teams focus solely on closing the deal, a critical execution task. The best acquirers succeed by designing a parallel process where integration planning and value creation strategies are developed simultaneously with due diligence, ensuring post-close success.
Deal models often flag redundant roles for cost savings. However, an integration leader can identify hidden value, such as crucial client relationships held by an administrative assistant. Cutting roles based purely on numbers can inadvertently destroy the very value the deal was meant to capture.
The "conquering hero" approach of forcing an acquired company to adopt your processes is the cardinal sin of M&A. Omar Tawakol's experience at Oracle showed that protecting an acquisition's unique workflows and incentives leads to growth, while rapid, forced integration destroys value.
A one-size-fits-all integration can destroy the culture that made an acquisition valuable. When State Street acquired software firm CRD, it intentionally broke from its standard process, allowing CRD to keep its brand identity, facilities, and even email domain to preserve its creative culture and retain key talent.
A detailed, rigid integration plan is fragile. A better approach is to create an "integration thesis" that sets clear "goalposts" and timelines for making key decisions. This allows for flexibility and data-informed choices (e.g., using A/B tests post-close) rather than locking into pre-deal assumptions.
Instead of only the buyer investigating the target, successful M&A involves "reverse due diligence," where the target is educated about the buyer's company. This transparency helps the target team understand how they will fit, fostering excitement and alignment for the post-close journey.