Expert Insights on How to Successfully Navigate Mergers and Acquisitions

The world of business is always in flux, with companies changing hands and names on a daily basis. How can you be certain that you’re in the best possible position to navigate a potential merger and increase value for your family of brands? We sat down with M&A visionary Boyd Wainscott to get some answers about how to mitigate risk and ensure success during these daunting transitions.

Where can a merger or acquisition significantly increase value?

Jordan Eller: So the first question I’ve got is, can you share an experience where a merger or acquisition significantly enhanced a company’s market position or value?

Boyd Wainscott: Well, believe it or not, it would be when I brought Petrowax out of bankruptcy and I sold to Allied Signal for a large annual return. That’s really great value. In the Allied acquisition, they were able to add products to their offerings to give them a broader market appeal.

JE: And so when you acquired them and they were in bankruptcy, what was the total amount of value they ended up accruing at the end of the relationship?

BW: The recurring revenue was $310 million dollars. And the percentage of EBITDA was about 8%. In 18 months, we sold the company prior to the IPO at about 118% annual return.

What are the most critical factors that help ensure a successful merger or acquisition?

“Beyond people and customers, you look at system strengths and location assets. Can you combine or reduce overhead? How do the products or product lines fit? Are you able to extend the market footprint while merging?”

JE: What would you say are the most critical factors to consider during the due diligence process to ensure a successful merger or acquisition?

BW: Number 1, you’ve gotta have a positive relationship with the management of the company you’re acquiring. Start at the bottom in terms of due diligence. So many people start looking at revenue and make some decisions on that, but start at the bottom and look at every part of the company, upward. And as someone who’s bought 23 companies, one of the keys there is: having the reputation of keeping your word, doing what you say you’re gonna do, and treating people well.

You gotta be trustworthy. And if you do one deal and you don’t keep your word, or you treat the people poorly, you’re not gonna be buying anymore. Word travels fast.

How do you approach cultural integration during a merger or acquisition to ensure a smooth transition and maintain employee morale?

JE: So kind of related to the previous question, how do you make sure that everyone’s rowing in the same direction?

BW: Well, you’ve gotta be honest. Let me give you one example.

I merged two companies. I bought a division of Johnson and Johnson’s business, then I integrated that into one of the Pitman-Moore businesses. So I went to a monastery and invited all of the key managers. I laid out the plan in terms of what I was going to do, and how I was going to size the company.

And I told each of them, “Here is your new job, do you feel like you can be effective in this position?”. It was interesting. Only one fellow came back, and he said, “Boy, I just can’t do it.” I really appreciated the honesty there. So I made him Ambassador to Europe to get a product approved.

JE: It seems like it goes back to the trustworthiness, you know? You need to trust them, and they need to trust you. And if everyone’s transparent, then, you know, we can we can make things work.

What strategies  have you found to be the most effective in discovering cost savings after a merger or acquisition?

JE: Okay next question: What strategies or tactics have you found to be the most effective in discovering synergies and cost savings after a merger or acquisition?

BW: Well, it goes back to what I said before. I start at the bottom. I meet with the people. I have one-on-one discussions and make an evaluation in terms of how they are doing their job.

The other thing that I do is I get permission from the management of the company I’m buying to go out and talk to at least 3 other key customers to see if what the people are telling me is the truth.

“Avoiding surprises should be your #1 priority when laying the foundation for a successful merger.”

JE: That makes sense. That’s good feedback.

BW: Beyond people and customers, you look at system strengths and location assets. Can you combine or reduce overhead? How do the products or product lines fit? Are you able to extend the market footprint while merging? There are so many factors involved.

What are the common pitfalls that companies face during mergers and acquisitions, and how can they be avoided?

JE: Last question. In your experience, what are the common pitfalls that companies face during mergers and acquisitions, and how can they be avoided?

BW: The #1 thing you want to avoid is surprises.

You have 120 days, in terms of putting the company together and having it function the way you want it to. If you’ve made a mistake during your evaluation of the business or leadership personnel, it’s going to cause issues.

You sit down and talk with them, and your focus should be on being fair to the people. If they’re gonna be at the organization and you know they’re not a good fit, then they’re not going to get good evaluations, and they’re not going to get salary increases. So to be fair to them, you need to tell them what the situation is.

If they’re really struggling and there’s no improvement happening, then you need to replace them and get someone more effective in that position. You’ve got to make those hard calls. Do it promptly and with respect.

JE: So if I’m understanding correctly, it’s making sure the foundation is as solid as possible before you start building on it.

BW: Right. In one instance, I had to replace 11 employees out of 17. That made all the difference in the world. They were down $200 million. And when we sold them to a European company, they were at about $480 million in revenue.

JE: Thank you so much Boyd, I really appreciate it!

BW: It was my pleasure.

If you’re looking for a trusted partner to help support your organizational transitions, start a conversation with us today and learn how Boyd and the rest of our team can help guide your business to long-term cohesion and success.