Colin Earl, CEO, Agiloft
Mergers and acquisitions are for risk-takers, particularly when you consider that 83% of them fail to boost shareholder returns. Despite these odds, M&A continues to appeal to companies of all stripes as offering the most direct path to achieving long-term strategy. The enduring siren song of M&A has generated troves of studies to identify why the failure rate is so high. The common culprits are differences in corporate culture and business systems. Collectively, these determine how a company does business.
A couple of decades working with companies on in the thick of the integration process has provided me with a unique perspective on the challenges of M&A and how to address them.
The first lesson I’ve learned is successful companies are bold about using technology to communicate new strategic priorities, integrate work processes and develop a shared culture. The examples below from TaylorMade Golf, Tierpoint and Northern Rivers offer object lessons in harnessing the power of technology to realize the advantages of a merger.
Setting the tone
In May 2017, Adidas announced plans to divest TaylorMade Golf to a newly formed affiliate of a private equity firm for $425 million. As a key deliverable associated with the sale, TaylorMade had to transition more than 6,000 transactional documents — everything from NDAs to multi-million-dollar contracts with the some of the highest-paid golfers in the world.
Initially, the team planned to use the legacy Adidas contract management system to make the transition simple. However, looking at the technology which was central to its operations, it was apparent that it didn’t reflect the identity and operating style of the new company. The older solution was cumbersome to use, had low adoption and did not fully address the needs of the business. TaylorMade decided to put in place a solution that would be foundational to its new culture. It envisioned a system that would manage all the company’s documents be intuitive, adaptable and include Japanese and Korean translation to ensure the entire team could connect through the same portal.
Despite the short time frame between the announcement of the divesture in May to closing a few months later, TaylorMade issued RFPs for a new contract management system, identified and tested finalists and launched it in a matter of weeks. As the winner of that bake-off, Agiloft got a front-row seat to its commitment to modernize its operations. TaylorMade and Agiloft went live with a completely customized contract management system in six weeks.
By overhauling one of its critical systems before the change of control, TaylorMade addressed immediate business needs and made a statement to its stakeholders about the kind of company it intends to be: one that emphasizes rapid-response, operational excellence and a collaborative culture where everyone has access to the information needed to execute.
Emphasizing customer experience
For some companies, an acquisition is a major undertaking, requiring years of planning. For others, like TierPoint, a provider of IT services, acquisitions are a weekly affair. Since 2014, it has realized more than 400% revenue growth through acquisitions — bringing together complementary companies to maximize efficiency and productivity.
TierPoint’s help desk platform is critical to executing its integration strategy. Customers expect each acquisition to add functionality without disrupting existing operations. If TierPoint’s helpdesk doesn’t rapidly incorporate the unique requirements of a new set of customers, while continuing to serve others with the reliability and speed they’ve come to expect, the acquisition would quickly lose support both internally and externally, threatening its business model
According to TierPoint Software Architect Nathan King, having the right service desk solution empowers its aggressive acquisition strategy because it enables economies of scale. Even with a larger footprint and bigger customers in more places, a single system provides visibility across the enterprise which simplifies the process of managing multiple customer bases.
Leveling the playing field
No matter how equivalent two companies appear on paper, when it comes time to merge, there is almost always an imbalance of power. Maybe it’s a healthier balance sheet, or a more recognized brand. It could even be as simple as where each company is located. No matter the reason, this hierarchy stresses the new corporate culture and, therefore, the integration. Using technology to level the playing field can exert a powerful positive influence as the following example from the non-profit sector illustrates.
In 2012, Northern Rivers, a large New York non-profit combined two century-old human services establishments under one parent company. The resulting organization employed almost 1,500 workers offering 80 different programs. Despite differences in size and budget, each group brought unique contributions to the table. Rather than strong-arm the smaller group to adhere to the other’s way of doing things, the leadership team decided to wipe the slate clean and take a fresh look at all its business operations. The goal was to standardize, simplify and speed up delivery of services to their vulnerable constituencies.
Working with the team to install an automated document and contract management solution, we experienced the positive impact of technology first hand. The system was configured to integrate and account for all aspects of the organization transactional processes—grant requests, fulfillments and funding—giving almost every team member reason to interact with it. The highly visible focus on automation, efficiency and accountability reflected the critical elements of the non-profit’s shift in culture and policies. Most importantly, the radical improvement in operations translated to rapid service delivery, fulfilling the organization’s mission.
The fundamental lesson is: technology plays an outsize role in today’s workplace. Putting the right systems in place can have a dramatic impact on how employees and customers experience and react to mergers, which in turn can make the difference in the success or failure of these major initiatives.