70-90% of acquisitions fail.
ā most of them an issue of integration.
BUT there's more to it: New HBR insights suggest a pattern worth studying š
3 TYPES of acquisitions:
[Spoiler: One of them seems to be disproportionally prone to failure]
1. Same Industry
ā printing company buys a smaller one
2. Unrelated Diversification (Conglomerate)
ā printing company also owns a clothing store and retailer
3. Related Diversification
ā printing company buys graphic design company
The author Dr Graham Kenny suggests that problems are particularly severe when
the acquisition is a related diversification.
He cites an example of a large printing company he worked with buying a graphic
design company.
Assumptions:
Clients will buy printing and graphic design services
Cross-selling opportunity
Better profit margins
2 years later the acquisition was unwound and sold off. Big failure.
Issues:
Wrong assumptions
Clients were disinterested in broader offer
New business model failed
While integration is a challenge in any acquisition, RELATED DIVERSIFICATION
faces the added challenge of a new conjoined business model
Have you noticed the same pattern?
#MA #acquisitions #PE #investing
CapLinked - Trusted Virtual Data Rooms
Post credit to our COO/ Founder Christopher Grey
Originally posted by Greg Brinson on LinkedIn
link: linkedin.com/in/gregbrinson
ā most of them an issue of integration.
BUT there's more to it: New HBR insights suggest a pattern worth studying š
3 TYPES of acquisitions:
[Spoiler: One of them seems to be disproportionally prone to failure]
1. Same Industry
ā printing company buys a smaller one
2. Unrelated Diversification (Conglomerate)
ā printing company also owns a clothing store and retailer
3. Related Diversification
ā printing company buys graphic design company
The author Dr Graham Kenny suggests that problems are particularly severe when
the acquisition is a related diversification.
He cites an example of a large printing company he worked with buying a graphic
design company.
Assumptions:
Clients will buy printing and graphic design services
Cross-selling opportunity
Better profit margins
2 years later the acquisition was unwound and sold off. Big failure.
Issues:
Wrong assumptions
Clients were disinterested in broader offer
New business model failed
While integration is a challenge in any acquisition, RELATED DIVERSIFICATION
faces the added challenge of a new conjoined business model
Have you noticed the same pattern?
#MA #acquisitions #PE #investing
CapLinked - Trusted Virtual Data Rooms
Post credit to our COO/ Founder Christopher Grey
Originally posted by Greg Brinson on LinkedIn
link: linkedin.com/in/gregbrinson