As a business succeeds, one possible path to grow comes from acquiring other similar businesses in the same region or in the same industry or outside of the current trade area. Many business purchases come with added challenges and many difficulties.
It seems fundamentally easy if you have created a successful business model to duplicate that success elsewhere. A business owner may think the business model in the home market has worked so well, just go buy market share elsewhere and duplicate the operation and grow to greater success.
An attitude or formula like this would be classic business school (MBA) teaching; however, it rarely works out easily and is a lot harder than one would expect.
Each business organization has created with its success or failure a unique culture and attitude along with a way of doing business and it is not easy to make changes to these attitudes or business practices. Generally people are comfortable with how they do things and resist changes - even changes for the better can create employee unrest.
At one time I acquired a business from a very strong handed owner who had built a nice small organization. He ran his business completely, including all aspects of the operation. After starting to make some operational changes, we heard rumbling from some employees. We held a meeting and, to my surprise, the business owner during the meeting announced to the group of employees, “There is a reason he acquired us and not the other way around, so let’s get going with these changes.”
I was astounded at the comment because the business owner had built every aspect of business operations himself, but upon reflection, the comment just showed how good of a businessman he was.
Changes in technology and systems are often a big source of frustration when integrating two organizations. People get comfortable with how they interact with and how their systems work, so a change in technology can create a lot of unrest.
I cannot ever recall hearing a front line employee ever say the acquisition system is easier, better or more efficient. If a business is far behind technologically, any attempt to fold in a different organization through acquisition is going to be even more challenging if not a disaster.
A friend of mine sold his family business to a big investment group and initially was thrilled with their “hands-off” approach. He boasted to me how wonderful it was after the sale being able to run the business just like he had always done along with doing whatever he pleased, but not having to worry about making payroll or meeting financial obligations and such.
A short time after this initial discussion, I noticed he was not at a meeting he usually would have attended. I later asked him why he missed the meeting and he replied, “I was free to go to the meeting, but “XYZ” (acquiring company) is cutting expenses and if I wanted to go, I would have had to pay the cost personally”. Certainly this was embarrassing for him to admit, especially in light of his prior comments, but he was required to follow the direction of his new owners.
When growing through any acquisition even if buying market share or adding a product, the acquirer is adding people to their organization. The group of employees from the initial organization plus acquired business may have developed a unique bond and a work culture with which they fit and usually enjoy.
Breaking up the uniqueness may lead to complete disaster, but not making adjustments will rarely produce accelerated results, so many challenges along with frustrations can occur. Rarely can two organizations merge to become “one big happy family” without some difficult changes to one or both of them.