How to successfully integrate smaller, innovative companies into large corporations
Acquiring for growth
Recent years have seen an unprecedented pace of technological advancements and shifts in consumer behaviour across industries. In the wake of this change, start-ups and other smaller, more nimble companies have gained celebrity status. As a consequence, large corporations are increasingly challenged by smaller, innovative companies with disruptive offerings which redefine established business models.
Without a doubt, disruptive innovation currently ranks high on the CEO’s agenda. Large, established companies face growth challenges in their traditional businesses and now need innovation to unlock new sources of revenue. To achieve this, companies are increasingly using M&A to capture innovative growth opportunities and create the ‘businesses of tomorrow’.
What are the integration challenges for these new types of deals?
As with any acquisition, it is important for the buyer to ensure the continued success of the acquired company and to retain the innovative mind-set of the tech firm or capability that was acquired.
Speed of innovation
Smaller companies are known for their rapid pace to develop innovative solutions. The speed to market is closely linked to how they operate, focusing on proximity to their customers or even co-creation. Applying complex layers of hierarchy would reduce the speed of decision-making and can interrupt this innovation capability.
Focus on a niche
Smaller companies often have a very narrow and focused offering. They establish themselves in small, highly specialised niches and their initial success enables them to scale to bigger, established markets. Large corporations, which have been operating in such established markets for years, are suddenly confronted with innovative players able to provide competitive solutions at a fraction of the cost.
Focus on risk and control
Smaller companies often operate with higher risk appetite and lower levels of control. This enables them to drive forward new ideas and models, and to succeed in a race that larger firms, who often emphasise risk minimisation, don’t even know is happening.
What are suitable measures to face these challenges?
Buyers should keep in mind five distinct success factors in order to maximise value creation through bolt-on acquisitions.
Significant reduction of M&A activity of Swiss SMEs in the first half of 2020 in an environment shaken by COVID-19