Don’t Even Think about Doing an Acquisition Until You Read This:
A 7-Step Checklist to Reduce the Chance of a Train Wreck from Your AcquisitionIt’s true. I’ve been preaching for almost a quarter of a century that acquisitions are for wimps. Mad that I brought this up? Sorry…but better mad than to destroy a perfectly good bank.
Unfortunately, many banks will try again this year to solve their inadequacy of systems, education, and correct strategies with an acquisition.
That said, if you have your house in order, this could be the year for a few great acquisition moves. The blue light specials are going to be plentiful in 2014, so not all acquisitions will be for wimps this year. A few could actually be good strategic moves. But don’t even think about doing an acquisition unless your own house is in order. Problems only compound when the scale gets bigger.
If you didn’t know how to systematically achieve organic growth before, an acquisition will make that worse. Don’t plan on being the exception to that rule. If you don’t have a system to ensure a great culture, the “us-vs.-them” games will multiply, and the passive-aggressive CYA strategies will get refined to the point that “big company disease” will rob your ability to get any financial benefit out of the acquisition turned nightmare.
This doesn’t just happen once in a while. Three overview studies in the Strategic Management Journal show that acquisitions fail to increase value an astonishing 70-80 percent of the time. Do you really think you’re immune to those numbers?
You can boost your immunity from a cold or flu with some antioxidants, a little ginger root and some vitamin D, and by staying away from the sugar and carbs! These things actually work.
But how do you boost your immunity to an acquisition gone awry?
First, stop thinking that the primary job of an acquisition is to align products and MCIF systems. Sure, you have to do that, but that’s just one little piece of making an acquisition successful—and the least significant piece at that.
Here are three much more critical areas that can reduce the potential for breakdown if you think them through carefully:
Create power-packed strategies to keep ALL of the best customers
Let’s face it: In an acquisition, customers and employees are what you are really buying. So how do most acquiring banks go about “buying” their new customers, convincing them to stay aboard? One little letter saying, “We’re nice people, let’s all stay together” isn’t exactly a brainiac’s approach to getting customers to stay with you and become raving fans and evangelists, now is it?
But that’s the strategy for most banks. It’s not nearly enough.
So how do you know the biggest concerns of these new customers? How can you speak to those concerns, create killer unique selling propositions around them, and get those articulated to them so they see tangible evidence that life is going to be infinitely better under your leadership? If you don’t have them at “hello,” you’ll probably be hearing some “good byes.”
Build an ongoing kiss-‘em-on–the-lips-until-they-chap plan to make sure the honeymoon lasts.
Since the number one reason people leave their banks is indifference after the sale, imagine how much indifference they experience if they feel abandoned by “their bank”—and now these strangers come along, and they don’t trust you because they may assume the worst.
It takes some time to build reputational equity…and goodness, you better be investing that time.
Well-executed strategies are imperative. Think about these: What’s your Top 100 strategy? Your Top 1000 strategy? Your center of influence strategy? Your blitz strategy? Your first 90-day strategy? Your segmentation plan? Your plan to fully own each client? Your referral plan? Well, this could go on forever…but you better have laid out a number of strategies to make sure you actually get something for your money AND that you have a step-by-step implementation process to make sure this thing called acquisition doesn’t go boom in the night.
Stop the “us-vs.-them” two-year profit-sucking conversation immediately
Remember the campaign mantra, “It’s the economy, stupid”? Well, in this case, it’s the people, silly.
After helping a multitude of banks do acquisitions, all of which, (yup, 100 percent) turned out to be a great ROI, let me assure you that the predictable demon that robs from your dream of an acquisition being a good ROI is the finger pointing, victim laden, those-people-over-there-are-stupid culture that will happen every time without a massive strategy in place—and an equally massive execution of that strategy.
Whenever you have an acquisition, the executives of the acquiring bank immediately think their IQ just went up 10 points, while the acquired lost those same 10 points. Because the acquired executive team and managers feel talked down to and unloved, they begin a “stick-it-to-the-man” rallying cry. In front of their employees, they begin to describe the acquiring team as the “evil empire” or the “ivory tower” to explain why they themselves are powerless and helpless.
Of course, the employees jump aboard that bandwagon quickly, and resentments build. Instead of people picking up the phone and suggesting improvements, they complain endlessly about the “idiots over at corporate.”
Reading that probably brings back some unhappy memories if you still have the scar tissue of an acquisition.
It’s real. And it happens almost every time.
That’s why your strategies MUST include a well-thought out strategy of how to engage the executives (while probably asking a few to leave and demoting a few others), how to get them welcomed to the new team and feeling inspired to add value, how to get the right people in the right slots to avoid costly mistakes, and most important, how to get all of the team on the happy bus and embroidering your logo on their pillow cases.
Tricky things. And you aren’t allowed too many mistakes because, remember, they’re laying for you and looking for the mistakes so they can prove they are, in fact, much smarter than you are.
If you don’t get them to love you in the first two weeks after the acquisition and to understand there will be zero tolerance of “us-vs.-them” under any circumstances—well, bless your heart, but you’ve got two really miserable years ahead of you, and there’s almost no fixing it without a massive intervention.Culture is the leading predictor of future growth and profitability, and now you have a much larger organization to scatter your energy; you’ve lowered your capital ratio, so you have more risk at the very moment new legislation is requiring much higher capital; and you now have many more people wandering aimlessly with no idea how to get organic growth and premium pricing. So the problem just compounded. No worries. It doesn’t have to be ugly. You just need to quickly get your own house in order. It’s really not that hard, but you have to get it right the first time. To get the 7-Step Checklist: Click here to download the PDF.