Business Consultant, Jeff Nock sheds light on scalability through acquisitions. Acquiring companies is one way that allows organizations to grow, gain market share and increase revenue and profits.
Jeff Nock encourages businesses in the position of acquiring other organizations to do so under specific guidelines, most importantly considering the cultural fit of the company to be acquired. While there are proven methods to financially analyze whether or not to acquire a company, evaluating the culture of the company to be acquired is more challenging.
When considering an acquisition, it is of course to evaluate profitability, market share, and other metrics, but a key to deciding whether or not to acquire a company is to get to know the leaders and people of the company being considered for acquisition.
Observing the company in action as well as spending time over dinners and networking events will help to acquire companies learn if the culture or the way they do their work is consistent with the culture of the company considering the acquisition.
This is one of the reasons Warren Buffett and Berkshire Hathaway have been so successful when acquiring or investing in companies. They not only run the numbers on companies to be acquired and know the industry but they get to know the people. Mr. Buffett and his team are excellent evaluators of leadership and culture within companies.
“So often when companies are pursuing an acquisition, they take a good hard look at the numbers and in some cases see an opportunity to eliminate competition but they don’t look at the people and the culture of the company and whether or not those people will be a good fit within their companies culture.
In addition to spending time with people in the company, it is also helpful during the due diligence process to talk to customers and partners of the company to be acquired and ask them what the people are like within the company.” Said Jeff Nock.
Acquisitions require significant due diligence of not only the numbers but the people. Being resourceful and open-minded to change is essential to growing. When organizations are acquired the overall company will only benefit from the acquisition in the long run if the remaining people in the acquired company will but into the new company culture and be willing to work hard for that new company and its leadership.
Jeff Nock continued, “Scaling via acquisition may seem easier than organic growth but because of the complexity of combining two teams and two cultures into one, acquisitions often are not successful in the long run. It can compromise the acquiring company’s culture. It is pivotal to evaluate for culture fit when conducting due diligence as part of an acquisition.”
Jeff Nock, CEO & Founder of Prescient Consulting, LLC. Prescient, which is a management consultancy that helps funded early stage and mid-cap companies achieve their vision and growth goals by offering services that include C-Level mentoring, strategic planning, business planning, business model ideation/evolution, financial guidance, market analysis, competitive niche analysis, business development, operational efficiencies, and brand evolution.