Vision & Execution’s Weblog

Despite the pipeline of 60 venture-backed companies currently in registration for IPO in 2012, M&A is still the most common exit for most startups.  And prognosticators forecast an improving M&A market after the slowdown in the 2^nd half of 2011.  So how do companies who position themselves for acquisition and those who acquire them deliver on the value they anticipate.  Industry data reminds us time and again that the failure rate for mergers and acquisitions hovers between 70% and 90% despite the annual $2 trillion spent every year.

A key criterion for success when acquiring for innovation’s sake, as opposed to scale economies, is laying the foundation for fundamental change in both the business model and the organizational culture.  Buying what could be considered disruptive or bleeding edge IP or products means that business as usual doesn’t cut it.  Few companies who go on buying sprees soften the beachhead internally for the degree of change required.  Incentives and other management metrics are not aligned in advance with the potential of the new technology so old and new management are caught in the crossfire while making important strategic decisions about budget and other business priorities.

Achieving the potential business value of an acquisition means losing the emotional attachment to the cash cow business(es) that enabled the acquisition in the first place.  It requires a clear understanding of where the creative destruction within the organization should occur and puts incentives in place for the organization to create a new business from the ashes.

Let Vision & Execution work with your teams to facilitate decisive action around new business models and product roadmaps as you plan for or seek to integrate innovative acquisitions.