Lessons learned from integrating foreign acquisitions

Interviewing for a consulting assignment I was asked  ”do you have experience with M&A?”  My immediate reply was “successful buys yes- successful implementations-no not really.”  I was both too hasty and too forthcoming in my response.  My only experience with acquisitions was with international companies, and there was always a flawed implementation to these acquisitions. 
  
I have been involved in the turnarounds of three European subsidiary organizations.  They were all initially acquisitions by an American parent. The initial acquisition or start-up was praised as net new local business, acquisition of new customers and a European footprint. Within 24 months, there were warning signs of stress., however, confrontation was avoided, so was corrective action.  None of them existed in the present state as successful subsidiary organizations.  Within a short period of time each was unprofitable, had lost customers and endured poor relations with the US parent.  They ended up with changes to top local management and a corporate black eye with paralytic internal fear of future foreign acquisitions. Turnarounds were performed, but the scars were there far into the future. 

What happened?

1. The leader of the acquisition did not realize he led a global team.The subsidiary organization acted as a European island and operated outside the corporate sphere.They were not accepting of the corporate strategy and felt the company “rules” never really applied to them.There was never an effective integration of the businesses.
2. Management of the foreign acquisition was assumed to the corporate private owner because he “did the deal”.It was not properly delegated to the domestic functional management by the owner.
3. The subsidiary team had an extremely weak talent bench and were led by an autocrat.The leader of the foreign organization controlled all communications with the US hub and was not transparent either with his team or with the parent.
4. There were two different management information systems.There was limited exchange of customer, financial and operating data.One was also comparing apples to oranges for metrics when comparing financial statements and management reports.Once can say that there were different metrics, thus, true benchmarking and data analysis was not effectively realized.
5. There was a tacit belief in the US corporate parent that the European with the best English speaking skills were the best business persons.

What to do differently?

1. Build a shared corporate purpose for the acquisition and explain many times how it should move forward for all stakeholders.
2. Bring the European leader of the acquisition to the US for at least 6 months.Their understanding of the American business, organization and culture would improve communications.It will also make their local management team more autonomous and improve their ability to operate independently.
3. Integrate the information systems immediately-if you don’t do it immediately or it will never become a priority.
4. Have the functional US heads of the business each be responsible for owning the global key business metrics within their responsibility.Annual visits to the subsidiary and/or their supply chain and monthly calls at a minimum for each corporate officer.
5. Embrace the new local employees.Have them become part of the system and don’t let them operate outside it.
6. Separate the acquisition team from the operational team.The acquisition is over it is time to get back to making it work.
7. Place pictures of all the acquired company employees on visual corporate displays within the domestic company.Do the same with the functional heads of corporate with the foreign operation.
8. Institute English classes for all foreign employees on company time at company expense.Some may need better comprehension than others, but all should be able read the company internal newsletters so they are informed.Encourage similar educational benefits of language classes and culture for US employees.It is a small price to pay for essential communications and better relationships.

Acquisitions are difficult and even for the best planned ones, integrations will usually be harder.  My conclusion is that there is a special skill set for integrating acquisitions.  http://www.jimthomasintl.com/service-offerings.html.  Most companies <$100MM in revenue have not been through this exercise so adding someone to the team with such experience will minimize the pitfalls of the integration.  Lean on outside organizations resources for assistance e.g. www.acg.org , if you don’t have abundant internal resources.

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