When it comes to integration, people often think equity ownership should determine their approach.
If they own 100% of the business, they should change all the target’s practices to their own. In a strategic alliance where neither side can force the other side to do anything, they might not integrate any of the practices.
But really, equity doesn’t have to dictate the level of integration. You shouldn’t be asking what or how many changes you can enforce but about which changes are right to make. Owning 100% of the company doesn’t mean you should make the business you just acquired just like you. One reason you bought this company may be that it is completely different from your own.
Let’s take a look at a recent transaction: Coach will acquire Stuart Weitzman in order to drive topline growth in high-end, luxury women’s shoes.
In this case, Coach will be very careful about what they change initially. Although Coach owns 100% of the company, they most likely will not force Stuart Weitzman to adapt to all of their practices during integration. If the company changes Stuart Weitzman’s brand, pricing, or selling model, they might just be killing the goose they paid a lot of money for.
In addition, Stuart Weitzman (the company’s CEO and creative director) will continue to contribute his creative talent to the company under new ownership. If you’re like Coach and talent acquisition is critical to your deal, you better have a good employee retention plan that makes sure talented employees like Weitzman are committed to staying with the company afterward.
We need to change the way we think about integration. Avoid a mentality that “the spoils go to the conqueror.” Rather, you should identify star employees and practices from the seller that are better than your own and recognize that as the buyer you might adapt some of these practices yourself.
Focus on what you’re trying to get out of the integration. Then your strategic outcomes will drive your approach, not the amount of equity
[…] We need to change the way we think about integration. Avoid a mentality that “the spoils go to the conqueror.” Rather, you should identify star employees and practices from the seller that are better than your own and recognize that as the buyer you might adapt some of these practices yourself. […]