With some recent high-profile M&A activity in the FM sector, three key pitfalls to avoid during the process:
In July this year it was announced that OCS had been sold to investment firm, Clayton, Dubilier & Rice and were set to join forces with Atalian Servest, as a new, enlarged, global facilities management provider. This followed a scoop from Sky News two months earlier about the likelihood of this happening, so came as no surprise to many. It has been closely followed last month by the UK Competition Authority giving the green light to the merger of Bouygues and Equans and only last week Imtech announcing their intention to acquire Spie.
For those of us who have worked in the facilities management industry, such activity in the sector is common place and should never come as a shock. From a personal perspective, I have twice worked for private sector organisations that have been acquired and have also spoken extensively with others who have experienced something similar in their careers.
What interests me are some of the issues that surface following the merger and acquisition (M&A) activity and cause it not to run as smoothly as many would have hoped. I will briefly summarise these here.
Firstly, as part of the M&A activity, the due diligence process rightly concentrates on the financial and legal aspects. However, I personally think not enough time is spent in truly understanding what makes the company being acquired or merged unique and successful and who the people at all levels within the organisation are who significantly contribute to that. It seems that this takes a backseat throughout.
Aligned to that, is some short sightedness in not truly understanding the business in enough depth and to then develop a coherent and credible plan to grow and diversify the business. Instead the focus is in bolting on the turnover to group performance, as well as hopefully robust earnings before interest and taxes (EBIT), to help appease shareholders/the market. Too many times I have seen post acquision key people leave a business, combined with the absence of an absolutely critical and credible integration and growth strategy. What has then followed has been turnover and profit falling off a cliff and what I heard recently, one poorly performing acquired company called “the ugly sister in the family”.
Another key area is taking the time to really understand the culture of an organisation and what makes it special for those working within it. The risk is that such culture, which has been a major factor in the success has been lost, with the introduction of new people into a business and their self-justifying remit of doing things “their way” and riding roughshod over those who did not fit their agenda. I have heard it said many times from people that, post-acquisition, the culture of an organisation has turned “toxic” and “not what it was”, as people jockey for new roles, needing to justify their current position or have been brought in and want to make an “impact”. How many times have we seen the latter, with such people gone in a couple of years and having wreaked havoc in their wake?
I don’t pretend to be a mergers and acquisitions expert; I am simply talking from experience and having discussed it at length with many others. Change can be a hugely powerful and positive thing, as is having the right focus and being open to the views and opinions of others. My view is that in not taking due consideration of some of the simple and obvious issues described above can have disastrous consequences.
(This article first appeared in the October 2022 edition of Network 6 magazine)