Mergers and acquisitions (M&A) can be a transformative growth driver for ambitious company founders and management teams, but developing a coherent acquisition plan and unlocking value post-deal is a complex process that can be challenging for businesses undertaking M&A for the first time.
M&A is complex as it encompasses myriad growth and integration strategies with multiple moving parts involving several important decisions.
As an investment partner that has helped portfolio companies complete and integrate more than 200 acquisitions over the years, we have deep real-world experience of how to support portfolio companies with acquisitions.
The stages of M&A strategy implementation
Implementing an M&A strategy involves three core phases:
1. Outlining the overall M&A objective
M&A is a lever that can be used to enter new markets, expand a company’s offering into new service areas or accelerate market share gain in a target customer group.
Establishing clarity and conviction on what a company wants to achieve through an M&A strategy is an essential first step.
2. Determining the M&A approach
After a clear M&A objective is set, companies are in a better position to determine the best approach to M&A to deliver that objective. One or two large, transformative acquisitions will be the best M&A approach to deliver on strategic objectives, while in other scenarios a series of smaller, tuck-in deals will be more suitable.
3. Determining an approach to integration
A central ethos at Livingbridge is to ensure that that when a company pursues M&A, the strategy delivers tangible value and synergies. Building bigger companies just for the sake of it does not create real value.
Forming and executing a coherent integration plan is therefore an essential part of any M&A strategy
Below we will focus specifically on how Livingbridge has leveraged its M&A experience to help management teams develop bespoke integration plans that deliver on specific objectives of businesses. Our investments in digital-first media agency Brainlabs and insurance brokerage Jensten are two case studies illustrating how different companies require different approaches to integration.
Imposing a rigid integration playbook on every situation doesn’t work. No two integration plans are the same.
Case study 1:
Jensten Group: the high-volume bolt-on acquisition strategy
We invested in insurance brokerage Jensten Group in 2018. One of the largest independent insurance brokerages in the UK. Since investing we have supported a growth plan driven by acquisition, expanding the geographic footprint and broadening the service offering.
Soft stuff is the most important:
- Power and people issues
- Commit to one culture
Types of value
For Jensten acquisitions are focused on combining resources to accelerate profits. This has seen the company move at pace and with a ‘modular’ buy-and-build strategy that does not require intensive integration and means newly acquired companies can continue to operate as standalone, independent divisions.
- Loss of key people
- Failure achieving financial goals
- See it through post-acquisition
Case study 2:
Brainlabs: the transformative M&A strategy
We first invested in digital-first media agency Brainlabs in 2019, backing a plan to build a complete international, data-driven digital media offering, with expansion into the US a key part of the strategy. During our partnership, Brainlabs grew revenues from £12 million to £90 million and in September 2023 we announced the successful exit of the business.
A core driver of the Brainlabs M&A strategy was to broaden its service offering and expand into the US market.
Rather than pursuing a high-volume bolt-on strategy, Brainlabs focused on larger, transformative acquisitions to deliver its strategic plan. We supported the company’s push into the US with the acquisitions of US digital marketing agency Hanapin Marketing and SEO specialist Distilled in 2020; and the expansion of its service offering with the purchase of Manchester-based conversion rate optimisation (CRO) business User Conversion.
Instead of rolling up resources to increase platform profits, the Brainlabs acquisition strategy was built on expanding capability and cross-selling, requiring tighter integration of acquisitions.
Soft factors matter
One theme that cuts across all M&A approaches and integration strategies is the crucial importance of managing soft factors including culture, communications and management team relationships and fit.
Financial analysis is a first and essential step in the identification of acquisition targets, but even the most attractive acquisition on paper will fail to deliver on its potential if there isn’t a good fit and alignment between vendor and acquirer management teams and the investment partner.
In the next article in this series we will take a more detailed look into how to build a unifying company culture as companies grow through acquisition.
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