By Guy Tweedale, regional VP at Rocket Software
Companies need to be mindful that mergers and acquisitions (M&A) can evoke a certain feeling of uneasiness amongst customers. There are concerns about job-losses, changes beyond recognition of a beloved company, and of course, the fear that the standard of service or products will decrease.
Over the years, we have gained a lot of experience through the process of acquiring other companies. Rocket’s core values begin and end with putting our customers and partners first, so it was always essential to demonstrate to them their continued trust in us is justified. In our case, developing and delivering even more solutions, was at the forefront of any deal, as was handling the process with care to ensure that the outcomes for customers lived up to the promise. Below are some of the points that we’ve learned along the way, both from our own experience and from those of other organisations.
Company culture
Companies are their own “worlds” and have their own set of cultural norms, values and traditions. As we all know from visiting other countries, trying to impose our own culture on the locals is rarely well-received. When a company is acquiring or merging with another, it is important to be aware that the microcosmos that is a company cannot and should not be forcefully changed. Company culture has often been honed and tended for many years, and when done well, brings a plethora of positive effects on employees, including a strong sense of belonging which in return increases health and well-being.
Furthermore, discussions around merging two different cultures need to happen. This is not supposed to be an invasion. Instead, throughout negotiations, both parties need to agree on which core elements to keep. Once decided, the culture needs to be committed to and effectively managed. If merger or acquisition is successful, a company will emerge looking strong and unified, which is reassuring to the customers. Any failure to understand the other business can result in a marketing mess, like Quaker Oats’ acquisition of soft drinks firm Snapple, where a failure on Quaker Oats’ part to fully understand the values of the company it was acquiring had disastrous financial consequences.
What the customer wants
Mergers and acquisitions need to make sense to customers. Not understanding customer needs, or the market of the other party, is a sure-fire way of losing business. While there is the potential to transform two businesses for the better, it’s essential to hang on to that one thing customers were drawn to in the first place. If you lose that, you’ll lose the customers too. This was the case when Google acquired popular phone and tablet maker Motorola in 2011 to develop top-tier mobile devices. The merger resulted in Motorola nose-diving and releasing a series of underwhelming phones, as well as a broken promise to upgrade older phones to the latest Android OS, landing this M&A on worst merger lists ever since. Knowing your client base and the problems they need solving is what truly matters.
Merging acquired IT systems
The integration of technology is another factor that needs to be taken into consideration. In most cases, each of the organisations involved will have a whole range of IT systems, many of which may be bespoke solutions developed in-house. Joining the dots not only between the various applications but between a variety of different customer databases can take years. If you’re trying to persuade customers that your merger or acquisition will streamline processes for them, you don’t want them receiving disconnected communications from you simply because you have records for them in three different databases which have no idea that they are the same person. IT integration needs to go very high on the list of priorities – you should be thinking about it already in the due diligence stage of the process before you take the plunge.
A new direction
Deloitte’s 2019 M&A report which surveyed 1,000 executives at corporations and private equity firms about deal activity, indicates that acquiring a larger customer base is increasingly a key motivator for corporations considering mergers or acquisitions, as much as expanding and diversifying products and services. This makes the challenge of integrating new customer databases even more urgent, but it appears that on the whole, we are doing a good job in the tech industry. 70% of customers see tech M&As as a positive development according to a study by PwC. A further 58% agree that capabilities improved after an M&A – industry consolidation (e.g. a single interface) and having to deal with fewer vendors are just two of many factors that speak in favour of companies ‘getting together’.
Meshing for success
Nobody ever said that mergers and acquisitions are a walk in the park. But when companies are performing due diligence to make the IT infrastructure work, and are being mindful of their customers, two can become one, successfully. Of course, the occasional acquisition of an industry rival does happen to eliminate the competition, but the benefits reach a lot further than that. Aiming for growth and pooling capabilities and talent together can ultimately provide customers with a better product and service.
Looking at our own history, Rocket Software has significantly grown through acquisition putting us in a position from which we are able to continuously improve our products and services. As the industry moves forward at speed, so can we, thanks to meshing our competencies with those of other strong players. It’s a very simple equation – (even) better together.
