By now, many of you have heard the clip of Sainsbury’s CEO caught singing “We’re in the Money” into a hot mic prior to his interview about the merger between Sainsbury and Asda.
For all the corporate, flowery language touting the benefits of the merger, this unguarded moment seemed to reveal the truth to the public: the deal is all about the money!
Naturally folks were angry, and although the CEO has since apologized, the damage was done. To some this episode bolstered the misconception that M&A is primarily financially driven and generally bad for consumers.
The Right Way to Approach M&A
While some do approach M&A with one thought on their minds – cold hard cash – most strategic acquirers understand there must be something more beyond dollars and cents (or euros in this case) that drives the deal forward.
Have a Strong Strategy
A strong strategic rationale is what really makes an acquisition and the newly merged company successful in the long-term. Acquiring a company because it’s a “good deal,” (i.e. cheap), may not be beneficial to your organization. If your company needs an experienced CFO, would you hire an undergraduate intern instead just because it will cost less? No. That would not make any sense.
Focusing too much on cost-cutting or financial engineering without establishing the purpose of the acquisition is a big mistake. If money is the only thing tying two organizations together, the new company may face issues down the line.
Put People First
Focusing on money alone can backfire because people are integral to the success of any organization. Your company could not function without its employees, suppliers, or customers. In acquisitions it is important to have a positive relationship with the seller who may stay on at the company after the transaction closes.
Cultural issues and integration challenges that arise post-closing can kill the value of the deal. This usually happens because the companies do not think about the softer side of M&A until after the deal closes. Make sure you treat people like humans, not just numbers of a roster.
The right approach to acquisitions begins with determining your vision for company growth and then finding a company that can help you achieve your growth goals.
As you think about growth through acquisitions, I encourage you to look beyond financial aspects as a deal driver in order to increase the likelihood of M&A success. And of course, if you’re ever interviewed on TV, make sure to check your mic.