Why forcing integration backfires: the importance of clear communication and a robust integration plan
Finding the right moment for integration is essential to a successful buy-and-build strategy.
Both parties need to be ready. Especially in DGA- and family-owned businesses, cultural and emotional factors play an important role, according to the experience of Bolster Investment Partners.
Shortly after an acquisition, there is often a natural moment to integrate the buy-and-build target and realise synergies. However, without clear communication and a well-thought-out integration plan, this can create resistance and lead to the loss of key people, says Joost van der Sluis, Partner at Bolster Investment Partners. In some cases, it can take several years before shareholders are mentally ready to step back from their business. Employees are usually only informed once the transaction has been completed. To ensure a successful integration and actually realise synergies, it is crucial to bring the organisation along in the process.
“Forcing things is counterproductive. Success lies in choosing the right moment and carefully guiding the integration that follows.”
Bolster Investment Partners was established in 2017 following the carve-out of the investment activities of Van Lanschot Kempen. Bolster focuses on minority and majority investments in family-owned and DGA-led businesses and applies a flexible, long-term investment horizon. Bolster supports portfolio companies in their growth and further development, among other things through buy-and-build strategies. Discussions often arise around how a company can continue to grow in adjacent or new markets.
“If a company is very successful in the Netherlands or Europe, there is often potential to grow in other regions as well. Alternatively, it may make sense to broaden the product range or service offering,” says Van der Sluis.
Acquiring a local player or market specialist can accelerate such a growth strategy. “It immediately positions you as a serious player in that market, both for customers and for employees.”
Eyes and ears in the market
The search for suitable buy-and-build targets is a joint effort between the management team and Bolster. Dealsuite is one of the tools Bolster uses as its eyes and ears in the market for potential acquisition targets. This often leads to contact with companies or advisors that were not previously on the management team’s radar.
“Our role is to map the landscape, assess which companies best fit the strategy, and determine who has the best entry point. In some cases, there are already existing relationships within the sector or industry,” Van der Sluis explains.
While management teams typically have deep knowledge of their products and markets, they often have less experience with the financial, legal and tax aspects of acquisitions and bidding processes. “During acquisitions, we work very closely with management and guide the transaction from A to Z, allowing the management team to maintain sufficient focus on the day-to-day business.”
Van der Sluis warns of a key pitfall. Many acquisitions fail due to underestimated cultural differences and overestimated synergy expectations. He therefore advises treating organisations with respect and taking a cautious approach to integration.
“It is important to preserve the distinctive customer proposition and workplace culture, and to prevent the organisation from losing its soul. The added value lies partly in purchasing synergies and knowledge sharing, but also in cross-selling.”
In his view, the greatest value is often created by acquiring companies that operate in attractive regions or offer complementary products or services, thereby strengthening the combined market position.
“You need to preserve the distinctive customer proposition and the culture on the work floor.”
— Joost van der Sluis
This message is also easier to communicate to employees of both organisations. According to Van der Sluis, communication around an acquisition should be clear and transparent from the very beginning. At the first announcement, everyone understands that changes are coming.
“That can be very unsettling for many people. They want to know what it means for their own role. As management, you should therefore clearly explain from the outset which areas will be integrated to realise synergies, but also be explicit about which parts of the integration plan are still uncertain. Invite employees to share their ideas. This helps prevent insecurity and disengagement.”
Finding the right momentum
Having a good feel for what is happening within the organisation, and understanding how ready it is to move along with change, is essential for a smooth process. This sometimes means slowing down when too many initiatives are running in parallel, says Van der Sluis.
“It really comes down to consistently finding the right focus and momentum.”
Companies within Bolster’s portfolio also learn from one another. Bolster’s investment professionals continuously track which insights and experiences may be valuable to other portfolio companies.
“A simple example: one company has extensive operations in India, while another is in talks with an Indian partner. We connect them so they can learn from each other.”
In addition, Bolster organises informal events where management teams can exchange experiences. “We recently organised a padel tournament for directors. Events like that make it easier to reconnect later on.”
This article was produced in collaboration with Dealsuite.