Mergers and acquisitions are increasingly becoming part of many organizations’ corporate strategies I found myself considering the motivating business reasons for an acquisition due to the recent acquisition of my company, Source One Management Services—a leading Procurement Services provider, by Corcentric—a top provider of automation solutions for Procurement and Finance. Although between 70%-90% of acquisitions fail, according to Harvard Business Review, many companies take the risk for the almost immediate access to so many important business elements: new markets, proprietary technology, grade-A talent, superior products, enhanced brand value, etc. Many acquisitions that start out with great intentions fail to become the powerhouse success story they envisioned, often due to missteps and a failure to plan. However, looking for the best opportunity for both parties to succeed and grow together is more successful than when one party focuses on the “what’s in it for me” mentality. In my opinion, acquisitions should be about mutual maximization NOT singular exploitation.
In order to learn more about what the acquisition could mean for both Source One and Corcentric, I sat down with our President and Chief Operating Officer, Matt Clark, to get his take on acquisitions.
Kaitlyn Krigbaum: Matt – you’ve been through an acquisition before, and I’m sure you have some notable key takeaways or lessons learned from previous integration processes that you’ve applied to this current acquisition. From your perspective, what is the most important consideration when approaching an acquisition; cultural alignment, operational alignment, strategic alignment, etc.?
Matt Clark: The number one lesson learned is that cultural alignment is THE success factor in a merger or acquisition; it’s the reason acquisitions succeed or fail. Too often, companies scout the profile of the company they’re looking to acquire, and say ‘this is what I need’, but pay no attention to where cultural alignment does or does not exist, either at the top-level or elsewhere in the organization.
Another element that drives success, or the lack thereof, is the motivation to acquire. Is the main driver financial or strategic? In my career with Corcentric, every acquisition has been a strategic choice with a bi-directional benefit for both companies. Typically, there’s some semblance of scale, but one company or the other is lacking in resources, or the technology, or both, and our goal in acquiring the organization in consideration is to strengthen both. I like to look at it as an equation where 1+1=3; we are stronger together than alone. In this instance, our decision to acquire Source One Management Services was to take a company that has done great things and give it scalability and a platform.
Kaitlyn Krigbaum: Achieving harmony and realizing synergies between two organizations isn’t always an easy task. Is it difficult to blend two organizations together, considering the potential unique cultural nuances?
Matt Clark: Acquisitions are a little like an arranged marriage; some end up being very happy together, some don’t quite work out, and some take a lot of work, but end up happier in the end. There’s a dating process in interviewing and onboarding candidates, and even then it’s sometimes not the right fit. In an acquisition, you skip that whole process altogether, so you’re likely to have fallout; it’s just something to prepare for. Ultimately though, it’s getting people to talk and to continue building a stronger culture, together.
Kaitlyn Krigbaum: In many instances, an acquisition causes this intense period of uncertainty and “corporate xenophobia”, if you will, in accepting new people and processes that seem foreign or outside of one’s comfort zone. This leads to a two-part question:
- Why do you think some people are so afraid or resistant to change in some instances, and:
- How have you addressed this to get people excited and on-board with the acquisition fairly quickly?
Matt Clark: Part of it is anticipating the response on both sides of the equation – existing people have concerns thinking perhaps they have become obsolete, or that the acquisition will result in significant shifting in their role. The people employed within the acquired company often fear the immediacy and unpredictability of the change, and quite frankly, a lot of people they may know have had scars from acquisitions. Some acquisitions come with immediate layoffs or changes in culture, and the response is often ‘this isn’t what I signed up for’. Ultimately, people’s first reaction is unavoidable, but it can be anticipated.
The solution, or way to address the resistance, is to be transparent; communicate as much as possible and as clearly as you can. Due to confidentiality reasons, the acquisition can’t always be disclosed right away. There’s a sort of necessary secrecy early on, but then as soon as it’s official, there needs to be immediate transparency. In the instance where we can’t retain 100% of the employees, it’s critical to acknowledge the hurt and the hard truths to move forward together, letting the intentions be known early on. Open lines of communication are critical so people can prepare.
Oftentimes, the reflex reaction is the acquisition company thinks they’ll be the ones to be cut. When making an acquisition, talk to people and understand their skillsets. Be genuine─good, bad, or indifferent. Not everyone will stay, and that’s OK.
Kaitlyn Krigbaum: How do you determine if someone is still a good fit or not?
Matt Clark: I stand by the notion that the culture of any organization is defined by the worst behavior leadership allows to take place. Give me somebody that’s culturally aligned with a baseline skillset and I’ll figure out how to make that person successful.
This acquisition has elevated both Corcentric and Source One to offer an end-to-end, full suite of solutions to enable customers to transform how they purchase, pay, and get paid. The most exciting element is that we can now do so as part of a larger, even stronger team.