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Strategic acquisitions can make or break a company's trajectory.
Having led numerous transactions both as an acquirer as well as a seller, I've seen the same mistakes repeated time and again.
As part of Key1's M&A series for growth stage companies, I'm sharing these perhaps non-obvious but critical lessons for the acquirer so that you don’t have to live them to avoid them.
M&A should serve your strategy, not exist in isolation. For example, if you want to enter the Japanese market, you can build a sales office from scratch or acquire a company already operating there. What matters is that the acquisition serves a clear strategic purpose.
This could be matching a competitor's critical feature, completing your product offering, or accelerating your technology roadmap. While optimal M&A opportunities may present themselves, most successful deals come from the deliberate pursuit of specific strategic objectives.
Your organization must be prepared for complexity before, not after, an acquisition occurs. Every executive should be capable of handling significantly expanded responsibilities overnight.
This capacity is especially critical for R&D, product, and support functions, while your CFO needs experience managing multiple operations and should be prepared to handle a larger organization. (In many cases, if your team is not ready, leaders from the acquired entity might be the better option to lead a function or initiatives.)
I encouraged my teams to think about this: if we acquire another company, we need to demonstrate the capability to effectively integrate and manage combined operations. Without this readiness, the merged organization might gravitate toward leadership that shows more confidence in managing the complexity, perhaps that of the acquired company.
One of the biggest mistakes I’ve witnessed is using M&A to rescue deeply problematic companies. When your business has fundamental issues - technical, market fit, or team - acquisitions will amplify these problems, not solve them.
If you have a strong company with one team or function underperforming, acquisition could be a faster way to replace that team, but in general, underperforming companies won’t be able to successfully digest another company.
Acquisitions work when you operate from strength. Introducing many new and complex dynamics into a weak organization could very easily cause it to collapse under the strain. The temptation to use M&A as a rescue strategy is strong, but it typically increases problems later on.
If you have a revenue plan for acquired products /solutions, make sure your CRO signs up for the incremental quota. Sales leadership commitment is the difference between financial projection and financial reality. If you're planning to integrate and sell the acquired company's offerings, always get your head of sales to sign off on the quota. If they're enthusiastic about the deal and want to prove that the acquisition works, they'll drive results. If they're skeptical, their doubts will become reality.
The underlying dynamic is straightforward - Your sales organization will need to prioritize and champion the new offering for it to be a success. When sales leadership views an acquisition as an obligation rather than an opportunity, they rarely allocate the focus and resources needed, regardless of the quality of the offering.
Different teams have predictable biases that need balancing for sound decision-making. When evaluating acquisitions, you'll have to face and assess these internal conflicts.
R&D teams sometimes claim, "We'll build this technology in six months" or "We'll have it next year." While these teams possess deep technical understanding, they often underestimate development timelines and overlook the market pressure to move faster than competitors.
Product teams can approach the same acquisition from the opposite angle. They usually emphasize how the new technology would enhance the company’s offering while downplaying technical complexities and integration challenges. They see the upside potential but may miss critical bugs and implementation risks.
Both perspectives carry merit but also some inherent bias. The most successful acquisition decisions come from structured processes that incorporate both viewpoints rather than defaulting to either optimism or caution. The reality typically lies somewhere between these competing narratives.
If technology is the acquisition trigger, don't compromise on any aspect of the technology assessment. Keep in mind, a not insignificant portion of acquisitions fail to deliver expected outcomes.
Companies often pursue acquisitions because they've promised something they don't know how to deliver technically. If you are not thorough and unrelenting in your tech due diligence, the likelihood of burying yourself in a bigger hole rather than pushing yourself forward is incredibly high.
Take the time and resources to fully vet that the tech will work with your solution.
If, by acquiring a company, you are entering a new market with a different audience, the best bet is usually to keep the companies as independent as possible while slowly look for topline synergies, like Microsoft did with GitHub and EMC did with VMware
When both companies work with different audiences, each knows what works for their market. Integration would risk disrupting their successful approach. Separation lets the acquired company continue excelling with its existing audience.
When you acquire a company with overlapping products, kill one of them immediately. The biggest mistake is maintaining multiple options for the same functionality. This confuses the market, and customers don't buy when they're confused. They go to competitors because they don't understand what you offer.
After acquisitions, internal competition often develops between new and existing offerings. Customer success teams try to avoid upsetting existing customers, so companies keep multiple products. Bad idea.
Be ready to upset one of the teams and kill their product. If it's not your existing product you're willing to sacrifice, don't buy the other company. If you're not willing to give the acquired product center stage, don't acquire. Having two overlapping products is always worse than having one clear direction.
Successful acquisitions very often depend on these not immediately obvious elements: Can your CRO sell with conviction? Will you have the courage to kill overlapping products? Is your organization actually prepared for the complexity?
Being aware of these dynamics will enable you to ensure that when you do decide to make that strategic acquisition, you are as set up for success as possible.