Q: What are some of the most overlooked details or challenges when integrating two companies post-acquisition?
I can make a long list of challenges and overlooked details in acquisitions, but I think they all stem from 1 issue: not being honest about what things will look like in 24 months:
- Does the CEO really want to stay? If not, just staying for an earn-out may be OK, but it’s not the same as wanting to stay.
- Why would the CEO work for someone else? I don’t hear this discussed honestly enough. If you’ve been a CEO for say 5 years, why would you want to work for some SVP at a BigCo? You wouldn’t. Not really. So how can this work out best?
- Are the founders (too) burnt out? It might be asking too much for them to sustain the same energy. Many folks sell because they are tired. And then, the acquirer asks them to own even more. E.g., run an even bigger business unit.
- Are the founders OK if big changes are made? If not, it’s best to discuss up front. What if the name changes? If the business is merged into another business? If another product becomes more important / strategic?
- What if the business does worse than planned after the acquisition? This is something no one really talks about. But if the acquisition under-performs, resources are often cut.
- How will the business be staffed if it does really well? Doing better than expected also can also be an issue! Why? Because headcount is often fixed in BigCos. I lived this. If you grow say from $20m to $200m ARR, can the BigCo really give you 1,000 more folks to grow it? Often they can’t. Because overall headcount might be fixed at say 15,000. And 1,000 would be too much of that.
- What will integration really look like — 12 months from now? Again, not enough honestly here. Will you be OK if a lot of your team is reassigned, or re-orged?
- Who won’t want the acquisition to fully succeed? Yes, the resources have to come from somewhere.
- Are you OK if they change the name of the product? If not, you may not be ready to let go.
- Are you OK if in 3–5 years they shut down the product? If not, you may not be ready to let go.
- What happens if there are disagreements on the escrow, the holdbacks, and other incentives? The instant there are material disagreements, things become at least subtly antagonistic.
- What happens if in 12 or 18 months priorities change, and it’s just not as strategic anymore? Where will that leave the acquired business?
Too much time is spent on the Now, and the economics of sticks and carrots.
And not enough is honestly discussed about the fact that once you sell it — it’s not yours anymore.
And that once you sell it — it’s just not the same. You can’t care as much. You can’t.