One of the most common mistakes that less experienced acquirers make is to apply their company’s standard Key Performance Indicators (KPIs) to the newly acquired target or to the integration/transition process itself.
As The Merger Verger has harped on over and over again, integrating two companies is not like running one larger one. It’s just not. (If you still can’t accept that premise, I suggest you’ll get more out of Archie and Jughead than any further reading of TMV.)
There are three key elements of successfully executing an acquisition:
- Keeping the underlying business running successfully
- Keeping the acquired business running successfully (or getting it to that state)
- Integrating the two successfully
Well, DUH! The point isn’t that that list represents any rocket science on TMV’s part but it evidences why the next concept is so important:
If you’re performing three different activities,
you measure and assess them using three different standards or sets of measurements.
That’s the key here: for your integration you need to “think different.”
Start with these questions:
- What is the strategic intent of my deal?
- What are the keys to achieving that intent?
- What are the impediments or risks to getting there?
The answers to these questions should be the basis upon which all your integration KPIs are developed, quantified and prioritized.
Read that again: KPIs for an integration are about achieving
the core purpose behind the deal: what to focus on achieving, what to focus on avoiding. They are not about measuring the integration against your normal yardsticks; they’re about measuring it against the point of the deal.
Needless to say (but I’ll say it anyway): the intent behind basically every deal is unique. So The Merger Verger can’t tell you what KPIs to monitor. IT ALL DEPENDS!!
That said, if your acquisition is about revenue growth through expanded territory, for example, track your sales in that territory alone (particularly sales to existing customers’ locations in the new territory), look for growth rates based on new standards not old, watch your new-customer intact; track your regional cross selling, measure after-sale follow through and reorder rates. In each case quantify your KPIs at levels that are appropriate for the new business, not the existing.
If your deal is about new technologies, for goodness sake measure your retention of key innovators but also watch the degree to which existing customer services or solutions are being repositioned with new capabilities, track your training of existing staff on new systems and their translation of that training into sales calls and revenues.