By Jaideep Shergill
I had promised a second installment to my earlier piece, Big Fish, wherein I wrote about the ramifications of a recent acquisition in the public relations space in India and the rationale and virtues of acquisitions in the marketing services industry as a whole.
I am calling this column, Deus ex machine because it’s the best way to describe the modus operandi of acquisitions and how these play out in today’s context. Of course, my commentary largely covers the many years’ of experience my partner Sunil Gautam and I have had both as acquirers and acquirees. Also owing to the fact that our firm, Pitchfork Partner Strategic Consulting LLP, offers advisory services to firms looking to be acquired or acquire assets in India, we have now enough of our own first-hand experience coupled with the work we do now to be able to share some learnings.
Firstly, for those of you who would like to know what the reason for the title of this column, here goes: Deux ex machina is an unexpected power or event saving a seemingly hopeless situation, especially as a contrived plot device in a play or novel.
So, this sums up my view of how an ancient plot device is being used over and over in the area of acquisitions’ in our industry. Just yesterday, I was with an industry thought-leader and a veteran of the industry and he was horrified at the way recent acquistions have played out. Some have come apart at the seams after consummation and others have been like an ongoing bad marriage. Acquirers like to believe or make the firm being acquired believe that they are a power which will come in and change their fortunes overnight exactly like a good piece of fiction or film. In the true sense, this is more like a piece of fiction because it never actually works.
How many times have we now seen a perfectly good firm getting acquired and then losing its best people and clients in quick succession or getting their capital sucked out or worse. Other examples include buying out a firm and then fitting the firm it into an existing business or brand owned by the acquirer and mangling a perfectly good business to fit into an ill fitting structure. The Trojan horse syndrome as I now refer to these maneuvers!
Here are some (I have kept these brief) tips to those who would like to acquire or be acquired:
For those who want to be acquired:
:: Please work with the suitor for a few months if not years on meaningful assignments and opportunities before consummating the marriage.
:: Please do not sell only for the sake of making money. Look at long term synergies and chemistry.
:: As a corollary to this, please don’t sell if you want to exit quickly. Stay with your firm and help navigate the quagmire which comes with largest groups.
:: Please do not only pocket the ill gotten gains between only the founders but also reward those who have built the business with you as these loyalists are likely to stay on after the deal is done.
:: Please ensure that you are prepared for what’s to come after the acquisition, anticipate all the possible best and worse case scenarios and please, please do seek advice from others who have experience in this area before you jump on to the bandwagon.
For those who would like to acquire:
:: Please don’t acquire only to build scale. This never serves the purpose. Look for the right reasons and the partner best suited for this alignment.
:: Please don’t destroy the culture of the firm you buy. Ease them in, be gentle and guide them. Allow the firm to continue to keep its core DNA and fabric intact.
:: Learn more about the people, business and clients. See all the offices, meet the staff and try and get to know people even before you close the deal. Merely doing the financial due diligence isn’t enough.
:: Don’t turn the acquired firm into clones or roll them up into silly superstructures and hierarchies and mangle them into just another piece in your grand experiment.
:: Please acquire only if you are in it for the long haul and are ready to invest financially and emotionally into the firm you buy and if you are an outsider, then into our country.
All I will say in conclusion is that its extremely important for both sides to be invested in the deal over a long term and not to treat the other side as an infernal plot device. Always remember that after all this is about people while people are strange, they do feel and emote!