By Ken Taormina
I have found when business executives, business owners, and investors hear about Mergers and Acquisitions they think of huge scale deals. The ones that make the business headlines in the Wall Street Journal, The Economic Times, CNBC, and Bloomberg. They are big, global and exciting. Unfortunately, what most don’t realize is that many large-scale Mergers fail to achieve most if not any of their financial business objectives.
The litany of failed large-scale deals includes AOL-Time Warner, Sperry and Burroughs into Unisys, Daimler with Chrysler, Quaker and Snapple, Sears and K-Mart, eBay and Skype, Bank of America and Countrywide to name only a handful.
Many great companies that are successful at growing their business, both large and mid-market follow a Programmatic or Progressive M&A approach to deals. They have learned that big deals often are not worth the risk versus the reward. They do not focus on achieving great scale which makes these Mega Deal deals incredibly complex and difficult due to myriad Integration issues related to Culture, Systems, Marketing, Business Mix and Geography. Instead, they focus on buying companies that allow them to expand their product or service lines, enter new geographies or increase their business efficiency. This is Programmatic M&A.
Companies that have been incredibly successful doing so are Accenture, CISCO, Microsoft, Oracle, but in my experience this can and is one of the fastest ways for a mid-market companies to grow.
Most Mid-Market Companies basically have three ways to grow revenue and market share:
- Organic (My experience is it is slow and steady at best)
- Partnership, Joint Venture, Licensing, Strategic Alliance (Complicated and they take time)
- Small Acquisitions (If focused on a specific objective on Rev Growth, New Markets, Product Diversity they can be fast and easier to integrate)
I have helped many mid-market companies double and triple in size with a smaller focused acquisition. While at Accenture in Europe, we targeted and acquired a $7m Revenue Automated Pricing Optimization Company with a founder and 25 employees. We closed the deal and used our Market Presence and Sales capability to position them in Germany and in the US in Detroit. Because they were well run, focused and had a class leading product and service offering in Automotive, we were able to grow them to $45M in Sales after 1 year. Integration was simple and we kept all the people including the Founder.
Accenture would go on to do many deals since 2011 buying small, focused companies that grew their Digital Marketing Business from a small business to a world leader challenging traditional Global stalwarts in Marketing. In Connected Cars, Digital, Procurement, Industry 4.0 the company used Progressive and very Programmatic acquisitions of $1.5Billion a year to grow the company to the Giant it is today in all of these dominant new fields. Many of these acquisitions were under $100M.
In the M&A, Bigger is not always Better for most companies. A targeted, strategic, well thought out growth plan tied to focused goals with very specific targets and KPI’s will return much more on a company’s investment.