Takeover Disasters

The process of taking over another company can be a very exciting time for you and your business, but it can very quickly turn into an unpleasant experience with serious lasting consequences. Here are some of the biggest mistakes made by companies during takeovers:

• Inadequate due diligence – You need to have done extensive research into the finances, existing contracts and liabilities of the company you are buying in order to avoid lawsuits, extra expenditure or loss of sales.
• Ignoring the culture of the target- If you underestimate the importance of culture then you are likely to experience some clashes, as no two companies will ever seamlessly fit together. To avoid misunderstandings and conflict from the beginning it is best if you set down a clear and consistent policy favouring the dominant culture.
• Forgetting to keep customers informed – You will need to reassure customers that the takeover is in their best interests because your competitors will attempt to unsettle them during this period.
• Failing to retain key employees – It is possible that competitors will also try to steal your best employees at this time by playing on insecurities they have about their own future within the company. You must reassure them and also be forthcoming about job cuts because an atmosphere of uncertainty will lead to false rumours spreading.
• Overpaying for target – Do not get carried away and end up paying far above the market value of the target, especially in e-business where it can be easy to over-estimate the value of a company because of the amount of potential you believe to be there.
• Bad leadership – Without a clear and powerful leader to drive the takeover forward it will stagnate. Make sure that if you are creating a combined managerial team from the two companies everybody is sure of their role.
• Not understanding foreign markets – A cross-border merger can easily fail if you simply assume that things are the same in another country. Legislation or consumer attitudes towards products and advertising can be vastly different.
• Poor IT integration – This process is never as simple as just swapping one IT system for another. In order for the transition to go smoothly it will require a lot of planning.
• Failed brand consolidation – It will be important for you to have a clear idea of how you want to manage the new brands you acquire. Maintaining a brand can be expensive in marketing terms so you may wish to drop some entirely.
• Mis-timing the takeover process – You will need to get the timescale just right in order to be successful. Rushing to completion could ultimately result in a poor merger with aspects overlooked, but going too slowly will only extend the period of upheaval further.

The best advice for completing a takeover successfully is to consider all the areas that could potentially go wrong and make sure you have a comprehensive action plan to guide the company through this period.

Hat-tip to Robert Moore from Business Data International Limited

7 Responses to “ Takeover Disasters ”

1. Chris Burgoyne
   
   Said on April 22nd, 2008 at 9:59 am

   As a real example to this, I worked for a large UK company who purchased a company based on the culture and sales figures.

   Proper research into these sales figures was not carried out and once the purchase had been agreed the figures simply did not add up. As for the culture.. yes it was there but it is very important to make sure that the company you take-over / purchase fits with the whole ethos of your parent company as a whole. Otherwise consumers may not “buy into” the company you are portraying.

   Great article this – so many things to consider.

   Chris Burgoyne
   www.loan-machine.co.uk
   www.iva-machine.co.uk

2. My del.icio.us bookmarks for April 17th through April 22nd | AccMan
   
   Said on April 22nd, 2008 at 7:59 pm

   [...] THE SMALL BUSINESS BLOG » Blog Archive » Takeover Disasters – Good advice but I wonder how many professionals feel qualified to run the gamut of issues this raises? [...]

3. Rostyslav
   
   Said on April 23rd, 2008 at 5:09 pm

   Really nice article…
   your blog has inspired me a lot…:)

4. Sell a business
   
   Said on August 26th, 2008 at 9:27 pm

   Couldn’t have put is better myself. Very sound advice. We deal with customers who make these types of mistakes daily.

   Getting to emotionally attached to a deal can result in you overlooking bad points which could come back to haunt you.

5. Robert Moore
   
   Said on September 19th, 2008 at 4:01 pm

   Not ensuring that you have correct funding in place which will ensure you have a good line of credit is also critical. Especially in these uncertain times..

6. Mel @ Make Rain
   
   Said on July 31st, 2009 at 10:58 am

   I have never been with a company that has been taken over, so had no idea all this could happen, very interesting and some sound advice if ever I thought of having my business taken over

7. Henal
   
   Said on August 11th, 2009 at 8:03 am

   I have come across many instances where there have been botch ups based purely on this point that you mention above.
   “Failing to retain key employees – It is possible that competitors will also try to steal your best employees at this time by playing on insecurities they have about their own future within the company. You must reassure them and also be forthcoming about job cuts because an atmosphere of uncertainty will lead to false rumours spreading.”
   Keeping those key employees especially in the initial take over period is a very very important part of the takeover process and really can lead to the win or loose situations that eventuate.

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