Company acquisitions: Why more than 50% fail

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6 tips on how to make your company acquisition a success

Company acquisitions take place frequently. – One company buys another. And there are many good reasons for this: You can increase your own success by landing innovative technologies or expanding your product range. Expansion increases your own market power, especially if you buy up competitors.
However, only around 50% of company acquisitions are successful. The rest falls by the wayside.
Why is that?
The greatest risk of company acquisitions lies in the integration: When a company is acquired, finances, customers & markets, structures & processes are analyzed thoroughly. But the people sector is usually ignored. Corporate cultures, interpersonal relationships, talents – all of this is often lost amidst all the changes. However, neglecting the soft factors is usually the cause of failure. Traditionally, you only realize this in retrospect. If the desired return and success do not materialize, one wonders why. The result: it was mostly down to the people. What did not seem important at first is often the decisive factor for success or failure. In our article, we will take a closer look at what exactly the triggers can be – and how you can deal with them when acquiring a company.

6 reasons why company acquisitions fail:

1. inadequate or incorrect communication:

Uncertainty in the company paralyzes the organization.
Change unsettles employees. Change triggers anxiety because it can mean losing something: for example, your own position or role within the company – or even your job. Particularly in the case of company acquisitions, it is assumed that synergy effects will arise and jobs will become redundant as a result. What do people who are insecure do? They wait for the next events and hope for guidance. This means that they act cautiously and do relatively little at first. It’s better not to go too far out on a limb, you don’t know what’s coming. This is why things are progressing less briskly than the company’s CEO would like. – The organization remains paralysed for the time being.
What can you do?
Inform your employees early and comprehensively! This is the only way you can prevent coffee-table conversations in good time and put a stop to wildly growing fantasies. Your employees need credible statements from you so that they are informed and know what to expect.

2. conflicts / different views at management level:

Delays and a bad atmosphere put a strain on the company, lead to unclear responsibilities, role battles and demotivation.
When people start working together, the collaboration is initially characterized by politeness and caution. But there comes a time when differences and ambiguities in the understanding of roles become apparent. Positions clash; a phase of intense conflict follows. In these disputes, rank and role are usually negotiated rather than the supposed point of contention itself. Such friction at the interfaces between the two companies coming together leads to considerable stress. Duplication of work, loops, inefficient processes, unclear wrong directions, work not done. Employees are insecure, the organization does not have its full energy available.
What can you do?
Focus on the topics of relationships and rank & role in good time. Conduct workshops in which these matters are clarified. Clearly define responsibilities and give your employees security as quickly as possible. Make sure that your employees have the opportunity to spend time together and settle into the new constellations. The more time spent talking about the relationships and expectations of the new roles, the quicker this phase is passed – and the quicker the ability to work is restored.

3. different cultures:

A lack of understanding, prejudices and dislikes worsen cooperation and lead to poor results.
Corporate cultures are often intangible. If you ask yourself: “What is our culture like?”, it is usually impossible to describe it precisely. But when another company or another area is added, you suddenly realize that ideas and values are very different. As values are something very profound with which people identify strongly, strong conflicts often arise when different values clash. One example:
A large corporation with a somewhat sluggish, bureaucratic structure buys a small, agile company. The differences are perceived on both sides. Trouble arises: The employees of the large company are annoyed that the employees of the small company do not follow the rules, but do whatever they want. They lack clear agreements and the new employees seem less reliable to them. The employees of the small company, on the other hand, perceive the strong structures of the large company as a burden and an obstacle to success. They are annoyed by the sluggishness and inflexibility of the employees of the large company.
What can you do?
Focus on the corporate culture! Workshops on the subject of culture can help here. Turn the topic of culture into a conversation, bring it from the unconscious to the conscious and stimulate a discussion about values. Management should promote communication within the company.

4. delayed decisions on staffing issues:

Insecurity, fears, unrest – risk of migration.
What happens when companies are acquired? When two companies come together, jobs are created that did not exist before. But there are also jobs that previously existed in both companies and are now only needed once. This means that new appointments have to be made and decisions taken. Unfortunately, it is often unclear for a long time. This is partly due to the abundance of these issues, but also partly to the inability of those responsible to make decisions. This unsettles the employees. Good managers who are up in the air often prefer to look for alternatives at other companies in good time. This way you can be sure you won’t lose out. Unfortunately, these employees are often quickly poached by the competition. It’s usually the good ones who leave and the not-so-good ones who stay. This means that the company no longer has on board the qualifications for which it entered into the integration.
What can you do?
Structure the recruitment process! Plan it and, above all, prioritize it! Analyze who the talents in the company are at an early stage and promise these employees employment and conditions. This requires transparency about the potential within the company. This can only be achieved across the board through a competent analysis of potential. The faster you succeed in doing this, the more likely it is that you will be able to retain talent and potential in your company.

5. little effective handling of expected resistance:

Conflict aversion or a lack of empathy create conflicts that jeopardize the success of integration.
Resistance is a typical phase in a change process. Resistance always arises where something new is in the making. That’s quite natural – humans have a tendency to preserve things. He would like to keep the old, the familiar; new things frighten him. It is healthy behavior not to trust new things straight away. Unfortunately, this resistance in change processes is often seen as unwillingness, lack of motivation or a lack of entrepreneurial spirit – and devalued. Employees’ fears are often not dealt with well. This entails the risk of migration, leaving the company and internal dismissal. This prevents rapid change and the work is done to a lower quality.
What can you do?
If you encounter resistance, listen to it and take it seriously! Make room for resistance. For example, we have coined the instrument of the “vomit workshop”. Only after the frustration has been released is the mind free to deal with the new. Convey a feeling of appreciation to your employees. Incorporate employees’ ideas into the change process. By dealing competently with resistance, you can avoid many losses.

6. egalitarianism:

The buyer’s attempt to assimilate the purchased company often leads to a loss of the quality that was the success factor of the purchased company.
A young company has successfully positioned itself on the market with a highly innovative technology. It thrives on its young, agile, highly qualified employees, who react flexibly to market conditions and constantly drive forward new innovations at short intervals. This has attracted the interest of an established, large company whose ability to innovate has diminished due to the cumbersome nature of its size. The large company hopes to increase its innovation again by acquiring the company.
Unfortunately, the following often happens in such situations: After the purchase, the large company imposes its processes, rules and regulations on the small company. The extensive decision-making processes involving many departments inhibit innovation. The sedate, uninnovative corporate culture of the large company burdens the flexible culture of the small, nimble technology company. Sooner or later, this will flatten the strength of the small, growing company. The reasons why it was bought disappear. Young, dynamic employees often migrate to competitors beforehand because they have no desire to work in a large, bureaucratic company.
What can you do?
Start a conversation! Take steps to ensure that the innovative culture of the new company is not affected by the acquisition. A compartmentalization of the newly acquired company can be of great advantage. Use the positive factors of the new company without fully integrating it. Another option is very targeted integration, which ensures that the success factors remain in place.
We have described in detail how you can bring innovation into your company in a separate article.
Would you like to find out more about company acquisitions or boost your own success? Talk to us:

The authors

Oliver Grätsch
Michelle 550
Michelle Templin
Christian Grätsch
Matthias Beikert
Susanne Grätsch
Monika Bt 550x550
Monika Steininger
Kai Hübner
Philipp Andresen 500x550
Philipp Andresen
Anna Isabell Arendt
Dr. Claudia Schmidt
Inga Kühn
Kassandra Knebel
Claudia Lehmann
Komplettes Team
Berliner Team