Maximising M&A success: the five things I wish somebody told me sooner

Established in the US, NFP (an Aon company) is a specialist people and insurance risk management business that focuses on creating sustainable solutions - both locally and internationally - for organisations and their people. I have been at the helm of our UK and Ireland operation since 2018 and, through our acquisition-based growth model, we have since acquired some exceptional businesses and people that have been integral to our ongoing success. Not only have we experienced numerous acquisitions ourselves, but we also provide support to some of the world’s largest private equity houses, helping them and their clients review the employee benefits and HR policies within potential acquisitions. We also have specialists that work with businesses post-acquisition to help them manage any organisational or employee benefits restructuring. We’ve not just been there and got the t-shirt, we also specialise in helping other businesses get their own t-shirt.

Acquisition-based growth can be an effective way of enhancing your market position. However, we only know the benefits of M&A because we’ve learnt from the mistakes and challenges along the way. As is expected when you’re trying to combine two different entities, the consequences of going into deals without weighing up key considerations and having a robust plan can be damaging. 

Consider this a ‘what I wish somebody told me sooner’ style confessional, to help you truly maximise the benefits of acquisitions earlier in your journey than we did.

1. “Don’t buy a business just because you want to be bigger”

It may sound condescending to say, but bear with me. Whether it’s your first deal or your 100th, being in the position to grow by acquiring a business is exciting and affirms that all your hard work to get to this point has paid off. That being said, it can be easy to let this excitement lead you into the trap of buying a business for the wrong reasons, however innocently or unintentionally.

When we’re looking at buying a business, there’s one fundamental question that I need to be able to say ‘yes’ to before I can proceed - “will this deal make us stronger?”. For us, that comes in the form of either deepening our expertise in one or more areas, or broadening our suite of client solutions. The best of us can have our judgement clouded at times, so always have a plan and a watertight rationale as to how the business you’re buying adds value to you and your customers, and how your business can add value to them and theirs.

2. “Have the difficult conversations before writing the cheque”

For everyone’s sake and in the interest of good outcomes, transparency and effective communication is vital throughout the M&A deal process, especially before money changes hands. There may be details that you’re anxious to raise because you think bringing them up may ruin the deal. Just think, though, if certain things are potential dealbreakers, is it not better to raise them early in the process rather than after you’ve spent a considerable amount of money?

Even small things can get blown out of proportion if they don’t come to light until late in the deal, and once the seller feels they have been deceived or a promise has been broken, it can be hard to regain the trust that is so influential to the future success of the partnership.

3. “How you communicate to employees can make or break your deal”

I’ve stood in front of numerous groups of employees post-acquisition to notify them of a deal and welcome them to the NFP group, and this experience has taught me one key thing. When a company gets bought, its people instantly assume the worst. I hate the thought of people seeing me as the villain, even temporarily, which is why it’s so important to effectively allay their fear of changes, articulate your plan for the future and outline how they fit into it.

So much of what a business does, how they do it, and the growth that made them attractive in the first place is down to their people. Reassuring them of their future is pivotal in helping you better retain the experienced talent that can help make an acquisition a success. Sometimes, buyers feel like they should leave the new employees to settle in - in my experience, the opposite is true. My recommendation would be to always implement a 100-day plan that you share upfront with focusing people, focusing on everything they can expect in the coming months. The less surprises, the better.

4. "Do the hard stuff first”

Your IT roles and responsibilities are a necessary yet potentially disruptive part of the M&A journey. This is especially true for data; it’s one of the most powerful tools for doing business effectively in the modern world, and failing to get it transferred efficiently can be a real momentum killer.

With anything that stops both businesses working as one post-acquisition, do it first and invest in doing it quickly and well. If you don’t dedicate the necessary time and resource to the more arduous jobs, they can hang over you and quickly become a very real, stubborn barrier to progress. In my experience, the quicker you can get your partnership operationally up and running, the better.

5. “When it comes to gauging culture, ask questions and trust your gut”

This applies to businesses on both sides of the deal. Due to the confidentiality of the M&A process, you’re naturally unable to speak to the employees of the other party until the deal has closed. Cultural alignment is vital when it comes to merging two businesses, and it can be difficult to get an insight into what it’s truly like to work for the company you’re negotiating with before you’re stood in front of its people.

That being said, I’ve found that you can tell a lot about the culture of a business from its leadership. As well as assessing whether you get along with them personally, ask the other business’ representatives about their people and the employee initiatives they offer; listen to the type of language they use when they talk about their people and pay attention to any possible red flags. Identifying cultural differences at the preliminary phase is much better than having the penny drop when you’re trying to merge two culturally incompatible businesses.