One of the most important questions a buyer has to answer when entering into a deal is “How far are we going to integrate?”. There is not a one size fit all answer, it depends on the strategic objectives of that specific acquisition and the value that has to be created. <!
We can identify 4 possible answers:
1) Holding position: the buyer made a passive investment and there is no intent to create interactions with the acquired company which is perceived mainly as a “portfolio” company. In this case the acquired company retains its autonomy and there is no actual integration of processes, structures and people.
2) Preservation position: this deal focuses on the requirement of the buyer to nurture the acquired firm via limited interactions aimed at allowing the latter to reach its full potential. Such interventions can take form, for example, in the financial control of the acquired company.
3) Symbiotic position: the buyer and the acquired company co-exist at first. Subsequently there can be a gradual transfer of skills and capabilities.
4) Absorption position: it is characterised by total consolidation of processes, structure and culture between the two firms. This type of integration is very common in mature and declining industries.
Of course the line between those four positions is not so strict, and in some situations may be blurry: it is not unusual in some deals to be unable to identify the net demarcation between holding and preservation.
However, this scheme is a great starting point aimed at making strategic decision not only at integration stage, but also at due diligence stage. In fact, in order to assess the potential synergies of the deal, the assessment of how far to integrate has to be carried out at the very early stages of the deal and not when it is sealed.
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I suggest checking out the 10th episode of Ask About Change on the differences between mergers and acquisitions.
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