Important questions when acquiring a company and integrating products

Acquiring another company can be a great way for companies to access new markets, onboard competent employees, add new products to their offering, and improve their technology. The potential for synergies can be big, but it is important to understand that the art of making a successful acquisition is not the same as simply acquiring a company. Challenges with national and corporate cultures, systems, organizational differences and “integration fatigue” are some of the key topics to carefully consider in order to realize the synergies envisioned at the outset while mitigating risk of wasting time and resources.

Mergers & Acquisitions (M&A) is one of the most important growth strategies for many of the companies in the Viking Venture portfolio. We gathered the members of our portfolio who hold key roles within product and technology to discuss lessons learned from their M&A transactions and, perhaps more importantly, share their experiences and best practices from the process of integrating acquired products and technologies into their own organizations.

Make sure you have time and capacity to follow up your people – they are the most important pieces of the puzzle

Below is a summary of the key take-aways from our discussion

  • Map out the purpose of the acquisition as early as possible. Is it customers, geography, technology and/or products you are acquiring? It is easier to achieve synergies if you know what you are actually acquiring.
  • Normally there will always be overlapping products and technology, which means you need to evaluate this thoroughly in the screening process. Map out what will be your strategic product and/or technology to avoid ending up in a discussion about what the ‘winning’ product/technology should be down the line.
  • Be open and transparent about what your end game is. Are you integrating the products, technology or are you migrating all the customers over to the existing product? Be transparent about the process and how it will run. Communication is key to avoiding opposition and unnecessary friction during integration.
  • Acquisitions where the purpose is mainly to consolidate market share may result in many parallel platforms with overlapping value propositions, products and technology. With this strategy it is important to understand how the platforms are built and what features and modules you can pull out when consolidating to save operating costs. This understanding is crucial when crafting the commercial and product / technical aspects of the integration plan.
  • Make sure you have a clear understanding of who the key decision makers are within product and technology at the acquired company, and make sure you get those people onboard to positively influence the process.
  • Conduct a gap analysis during the screening process to map out your product strategy. Acquired products and technologies need to align to or enhance the existing product roadmap. Gap analysis is also a great way of discovering what needs to be done to migrate the customers over to the go-forward product offering. Key questions: Is it technically and commercially possible? What is the required time frame? What do we need to develop? Who has key roles and influence at the acquired company to get the organization behind the effort?
  • Evaluate technology platforms based on technical criteria, architecture and DevOps. Make sure to select the best platform moving forward despite organizational opposition. Make sure you know what new functionality is needed and if you are able to transfer modules from other platforms.
  • It is a balancing act between mass migration of customers vs spending time getting them over to a new contract with new products at higher prices. An obvious upside of the latter can be higher ARR per customer, with the downside that it takes time and resources, with risk of churn. Be aware of this trade off and that longer migration timelines can have a steep alternative cost by locking in technical resources which could be better used for other tasks
  • Increasing the price requires great value-based communication. Demonstrate the value of migrating to a new system to the customers. Changes are always hard, so you need to have a clear strategy and understanding of the implications for customer value.
  • Moving customers from existing platforms to new platforms is not easy. You need incentives that motivate existing and new customers to make the transition
  • Be transparent on which technologies and products are being phased out. Trigger your employees’ curiosity – “Do you want to work with legacy technology or our new, modern technology?”.
  • Perform a customer analysis to evaluate which ones are worth migrating to the new platform and which ones are better kept in legacy mode – you need both. While the old technology and products remain profitable you might want to keep them running. Be open about this strategy
  • Find 1-2 VIPs at the acquired company that are key to getting people excited about the new product/technology. Make these the ‘champions’ of the new offering
  • Consolidate platforms before you go from having a technical problem to an organizational problem
  • While autonomy can be important for acquired teams, it is important to find the right balance between governance on methodology and system vs. ways of problem solving
  • Coordinate work processes and tools with clear governance to handle workflows, tasks, roadmaps, design work and so onOpenness and transparency are key to building a common culture. It is key to have everyone on the same system in terms of collaboration. Teams can create their own channels for communication and problem solving, but these need to be open for everyone to see and learn
  • Be open and communicate what kind of infrastructure and internal system you are using to avoid unhealthy system discussions during the integration process
  • And make sure you have time and capacity to follow up your people – they are the most important pieces of the puzzle

There are many considerations to make during the screening, deal and integration process. The steps you take will have a significant effect on how successful the outcome will be. Building a great understanding of the integration process and being aware of barriers and pit falls can minimize internal opposition and frustration, while increasing the probability of successful realization of synergies – within product and technology, but also within the culture and organization.

Key questions we discussed during this Viking Community session which are important to consider

Organizational questions

  • How do we succeed in getting everyone aligned with new ways of working in terms of modern product development processes, new technology and so on?
  • How do we balance between a migration process that can be highly demotivating for the acquired company vs. letting the acquired company run autonomously and risk a slower realization of synergies?
  • How do we align product and technology streams the best way possible without compromising the momentum in the company – how to avoid “integration fatigue”?

Product / Technology synergy questions

  • How and when do we start looking at product synergies in an M&A process? During screening, during the acquisition or in the integrations phase?
  • How do we handle new product synergies vs existing product strategies?
  • What are the pros and cons of integrating the product and technology environment right away vs letting the acquired company run as a separate organization with its own technology stack?
  • What synergies do we see most often and how do we realize these?

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Ingvild Farstad, Community and Marketing Manager, Viking Venture

Ingvild manages Viking’s software community, which offers a unique environment for our portfolio companies to exchange knowledge, ideas and experiences within the most important processes for software companies.