Growing your enterprise can usually be accomplished following two paths: a) organic growth—the process of building your overall portfolio of stores through the development of ground-up store build outs; or b) expanding your portfolio through acquiring other locations. In most cases, the strategy of a growing an organization is generally accomplished with a combination of the two.
While organic growth is slower overall, the process allows for the enterprise to effectively manage the pace and design of the stores in order to provide consistency throughout the chain. Growth through acquisition can quicken the pace of expansion but cause havoc with consistency since you are buying other peoples vision. With an acquisition strategy, not only will consistency be sacrificed initially, but also managing the overall integration of the acquisition becomes an art all in itself.
Acquisition integration takes place on many fronts to include brand management, cultural integration, systems dovetailing and overall process management. Since a number of economics depend on the overall integration of the acquisition, extreme detail needs to be addressed with the on boarding in order to capture and accentuate the synergy of the deal. Failure to integrate properly will result in missed opportunity and a diminished return on capital employed.
Here are some key areas to consider with the on boarding of an acquisition:
Over Communicate: There is nothing worse than an integration process that fails to communicate the overall objective and detailed action items to both the existing and on boarding teams. Creating a detailed, step-by-step project plan that is shared by all parties in advance is unequivocally critical in order to keep the project on plan and the angst at a minimum. Every area of the project should be detailed including cultural, brand, systems, inventory and auditing in order to successful manage this integration project to an on-time, on-budget conclusion.
Manage Cultural Migration: Acquisitions can be an emotional time for all parties. To the existing employees of the acquiring company, they will be saddled with incremental work so that the integration will be smooth. For employees of the acquired company, security for their jobs is the number one overall concern for them. It is vital to ensure that through communication that everyone is crystal clear on the expectations and where applicable, validating their role within the organization. In addition, migrating the acquired company into the culture of the existing enterprise should be gradual rather than abrupt.
Brand Management: Obviously, the most apparent part of the acquisition involves the de-branding of the acquired location and the transition to the new brand. While this may be an end to an era for the original brand, the newly branded location can often lead to a rejuvenation of their sales – especially if the brand is now a part of a progressively expanding portfolio of stores. The newly branded store may be able to capture increased market share simply due to the fact of their association with a growing brand.
Systems Integration: Pricebook management, back office integration, inventory procedures and the overall flow of sales data all have to be managed throughout the transition. It is critical that the stores continue to operate simultaneously while the transition is in place. Every procedure must be vetted in order to ensure that data can be rolled up appropriately to the overall corporation. If a glitch happens here, the ongoing benefit of growing through acquisition will be compromised.
Manage The Physical Stuff: Equipment, store fixtures, exterior signage and all moving parts need to be accounted for in order to ensure that the acquisition is whole. Full inventories of each store—both equipment and product—need to be complete on the day of transfer. With multiple locations within an acquisition, that requires that a fully trained team be assembled in order to hit the ground running. The economics of the deal clearly is reliant on the appropriate transfer of all inventories.
Track The Synergy: Lastly, understanding the economic synergy of the deal in advance will highlight the need to track the ROI in order to hit that goal. All too often, companies that grow non-organically tend to move onto the next deal before the integration of the existing deal is complete. This habitual growth pattern can spell doom for the acquiring company in the long run because opportunities for enhanced ROI will be missed along the way. Providing a post audit on each deal will be one final way to hold the enterprise accountable for the capital investments.
Growth for an organization is vital, not to mention invigorating for the entire team. With corporate growth, opportunities for personal growth abound throughout the organization. While I have been a part of both organic and acquisition growth models in my career, I can personally attest to the vigor each strategy provides. There is nothing more satisfying than successfully integrating a group of stores into a portfolio that in turn adds accretive value to the organization. Done well and the company prospers. Failing to plan for the on boarding of an acquisition and the results will not only harm the stores coming on board, but weaken the overall company.
John Matthews is the founder and president of Gray Cat Enterprises, Inc., a strategic planning and marketing services firm that specializes in helping businesses grow in the restaurant, convenience and general retail industries. With more than 20 years of senior-level experience in retail and a speaker at retail-group events throughout the U.S., Matthews has recently written two step-by-step manuals, Local Store Marketing Manual for Retailers and Grand Opening Manual for Retailers, which are available at www.graycatenterprises.com.