SaaS acquisitions have been “frothy” (to say the least) over the past 5+ years. And while valuations may push lower given the current climate, the M&A market for SaaS is probably going to increase as more companies explore financing options in the Coronavirus era.
This is not an article about how to get acquired. It’s an article about the emotions, behaviors, and perceptions that come up after the acquisition, during the integration period.
I’ve lived through a few acquisitions and been a bystander for several as well. One thing I know is that being empathetic, keeping perspective, and remembering the deal thesis is critically important for both parties after an acquisition. For the acquired team, managing emotions also tops the list.
When one company acquires another company there is a lot of work that goes into integrating the two entities logically (organization, structure, policies, culturally, etc) and physically (locations, products, databases, systems, tools, etc).
Things will change for both companies. But of course, change typically bends much more towards the culture, norms, processes, and systems of the acquirer than the acquired.
If your company has been acquired, how you manage yourself will directly impact how you get through the integration (and how successful you will be if you want to stay on at the company) and can impact the success of the integration.
If you are on the acquiring side, how you manage yourself truly impacts the feelings, engagement, and performance of the other side. It matters. A lot.
So, here’s my advice about what to expect so you can manage your emotions and behaviors after an acquisition.
For the acquirer: Be respectful, empathetic, and overly communicative. And as transparent as you possibly can.
For the acquired: During, and after, the official integration period there will be highs and lows, good things, and bad things. It all usually works out if you give it time. Keep your emotions in check and remember the deal thesis.
Advice for the acquirer
Seek to understand. When you acquire a company you can just take things as they are on the surface, or you can learn the story and history. You will scratch your head over why something was done a certain way, or how someone is compensated, or why a policy exists. Seek to understand the background before jumping to conclusions or judging.
Limit judgment. When you acquire a company you will compare and contrast no matter how pleased you are with what you acquired. You will naturally judge it. It’s a normal human reaction. Don’t let the acquired team get a glimpse of that judgment. Because being on the receiving end of judgment sucks and tarnishes your relationship with the new team, and also because you may be judging something without knowing the whole story. This is a case where keeping your judgment to yourself can go along way in keeping feelings from getting hurt. Which in turn keeps the team engaged and productive.
Appreciate what you bought. You bought the company for a reason. Just remember that reason. Because you are going to find warts. You are going to stumble upon things you don’t understand or disagree with. You will have head-scratching moments. You will be biased (you just will be). That’s all fine if you remember you made the acquisition for a reason. Appreciate what you bought. Make sure the staff of the acquired company feels that authentic appreciation. Help them continue to be proud of what they built or achieved. It takes away some of the sting that comes with change.
Decide what you are going to protect. Then actually protect it. Maybe you bought the technology. If so, don’t go changing it. Maybe you bought the people. If so, appreciate them and make sure they feel stable, respected, and confident in your company. Maybe you bought the customers. If so, make things simple, easy, and as non-disruptive for them as possible. Whatever you bought, protect it. Your inclination may be to change it because it’s just human nature to put your own imprint on something (professionally or personally).
Be empathetic. Put yourself in the shoes of the staff you acquired every day. Bring that empathy to your conversations, your slack exchanges, your decisions, your tone of voice. Make the best decisions for the integration and the thesis. But bring empathy to everything you do. It will help keep the staff engaged and prevent negative feelings.
Be sensitive. Humans are messy. Their feelings get hurt. They have pride of authorship or ownership. Even a well-intentioned, kind-hearted acquirer can unintentionally cause hurt feelings. Be more sensitive than you think you need to be.
Think before you speak. People take the things you say and remember them. “We will backfill that position”. “We will be investing in X.” “There won’t be more layoffs related to the acquisition.” Staff is listening to every little word and watching every little cue for incongruity between what you say and do. Be mindful of how you position things, promises you make, things you say you will do. It’s so important to be honest and transparent to the best of your ability because the little things add up and can create distrust, which leads to low employee engagement and negative cultural impacts.
Communicate. Communicate. Communicate. Communicate more than you think you need to. Come up with a communication cadence for your first 90 days post-acquisition that includes frequent town halls, plenty of Q&A sessions, staff emails, and announcements in Slack. Maybe try some open office hour sessions. Share more than you think people care about because after an acquisition they care about it all. They are nervous, they are stressed and they may be really concerned about themselves, their customers and their co-workers. Communication is the anecdote. And be honest in all communication, because everyone is highly attuned to your words and body language.
Ask for feedback. When you are the acquirer, it’s your show and you set the rules. Which means you can sometimes forget to ask for feedback along the way. “How are we doing?”, “Are we communicating the right things?”, “Do you have concerns about where this is headed?”, “Do you see anything standing in the way of us reaching our goals?”. Don’t sweep hard conversations under the rug—the staff you acquired probably has very valuable input and may see obstacles that you don’t see. Welcome their feedback and create an open dialog.
Advice for the acquired
Seek to understand. The people that acquired your company will endeavor to understand how you operate. They deserve the same from you. Don’t assume, don’t rush to judgment. Seek to understand how they do things, why they do things, and what you can learn from them. Keep an open mind.
Accept attrition. There will be employee attrition—voluntary and involuntary. Not everyone will want to stay. Not everyone will rise to the occasion and perform at a level that warrants them staying. This is OK. You can’t, won’t and should not save everyone or convince everyone to stay. Focus your efforts on those most critical to the success of the deal. And what if you are one of the people who want to flee? View yourself as objectively as you can. Are you critical to the success of the acquisition and integration? If so, stick it out. If not, have open conversations with someone you trust about how to proceed. But don’t rush to judgment. Anything you, or anyone else, is feeling should be evaluated over a period of weeks and months, not hours.
Don’t be territorial. Let me put it bluntly: It’s not your territory anymore. Try to put aside the pride of authorship and ownership. This is not easy, but you just have to.
Decide what you want to protect. If you were acquired because X was working so well, and then your acquisitor starts to meddle or change X….what are you going to do? Say nothing (and live with yourself if it blows up in their face)? Pound your fists on the table to get attention and shout from the mountain top what a mistake it is? There is no right or wrong here, this is a highly personal decision based on your personality and conviction. Just know, these situations will come up. You acquisitor will say, “We love X, there is no way we are changing that—we want to learn from you about X and we want it to keep working just as well as it has been!”, and they will change it. Either because they weren’t being fully transparent about what they really thought about X, or because they just forgot, or because companies have an innate need to put their imprint on things. It’s not usually nefarious, it just is what it is. If you spend all your time just pointing out all the things they are changing and getting flustered about it, you will actually be impeding the integration progress. There will be changes. Accept it.
Get in touch with your emotions. You might have a rollercoaster of emotions before, during, and after an acquisition. And once that is over, you will get on another rollercoaster during the integration. Try earnestly to understand what’s driving your emotions. Are you burned out because you were pushing so hard up to the acquisition moment and now you need a break? Are you feeling a bit of depression or remorse around selling (totally natural, and in most cases dissipates if you give it time)? Are you feeling betrayed by the company founder for selling? Are you feeling anxious about the future of your staff, yourself, your customers, or some future earn-out? Any and all emotions—high and low—are possible and normal. This is where getting a little Zen can help. Seriously. Try to get some distance from the reactions and emotions that happen in the moment, because it will pass.
Keep a long-term perspective. Most things that feel and look like a crisis really aren’t and will blow over. People are more resilient than you think they are. If I think about 100 integration-related “crisis” I’ve seen, only one or two actually ended up being a true problem.
Remember the deal thesis. There was a reason the company was acquired, and if you are a founder you had your own personal reasons for selling as well. At every moment when things feel like they are going haywire, remember the thesis. Is what’s happening right now actually going to impede the achievement of the goals for the acquisition? If not, then it’s probably not that important even though it feels like it is in the moment. Lots of icky stuff can happen during integration—people leave, people get laid off, decisions get made you don’t agree with, politics might come into play. Whatever it is, remember the deal thesis.
This too shall pass
Many acquisitions fail to meet their intended outcomes and goals. But it’s not because of how you felt or behaved while you were on the integration rollercoaster. Deals fail because of bad strategy, bad implementation, and bad governance. Managing yourself and your reactions can go a long way in helping you be successful through the integration.