When it comes to M&A, don’t be a Zombie Acquirer

When it comes to M&A, don’t be a Zombie Acquirer

The British firm Interserve, whose work ranges from building airports and schools to cleaning London’s underground and placing people in jobs, has spent around £400 million on buying businesses over the past few years. Numerous acquisitions were made that captured headlines, including Topaz Oil and Gas in 2012 and Initial Facilities in 2014.

To put this growth spurt into context, Interserve’s own website says this

”.. in 2000 we had £1.2 billion revenue, generating £23.7 million profit and employed 10,000 people. Today, we employ over 75,000 across the world, and in 2018 reported gross revenue of £3.7 billion. So what’s next for Interserve? The best is yet to come…”

Perhaps not! Interserve has found itself in the news recently as it tries to avoid collapse.

What didn’t capture the headlines with this acquisition spree is the integration required for all these acquisitions into the corporate business. Post-merger integration, as it’s commonly called, is M&A’s unsexy cousin. It doesn’t usually capture the headlines until the impacts of poor integration creates too much complexity, exacerbates debt and reduces profit. Just the situation Interserve has found itself in.

The hard ‘unsexy’ reality of M&A is that they are high-risk events that require plenty of planning and decision making in a pressure cooker environment. Integration requires skilled people, clear processes and strong leadership. Unfortunately, at their own peril most executives fail to appreciate that closing a deal successfully is simply the start to M&A success. Acquisitions often define executive careers and legacies, for better or for worse.

The problems of Interserve also serve as another reminder that to be successful in M&A business must have a clear-eyed understanding on what specific capabilities makes them successful. This means understanding the very things they are very good at, and conversely where they have little or no experience. Buying new companies that have only have a tenuous capabilities relationship with what the acquirer is specifically good at is only asking for trouble. Reap what you sow. Don’t be a zombie acquirer.