When a Healthy Smaller Company acquires a Troubled Larger Company, it is described in my business as "landing a mechanically-troubled F-18 fighter jet on stamp-sized ocean-carrier in darkness".
Here is the board of the smaller company, unchallenged, rubber-stamping profits year-after-year, stable management team, nice customers, committed suppliers, who decides that the opportunity of acquiring the troubled regional leader is a once-in-a-lifetime opportunity. It sure is! it is also, in my view, the once-in-a-lifetime opportunity to throw the baby with the bathwater, if not done properly.
In this type of situation, it is best to create an acquisition holdco, which will acquire the troubled business and run it as a standalone business for a while. Maybe tweak the management team, create synergies across operations, customer portfolios and suppliers, but certainly NOT merge the two businesses until a three-year "co-management" process has been completed.
The better the "Co-Management" process is run, the smoother the merger will go, and the better results will come out from the 18-month post-merger integration process.
All-in-All, it is a 4-yr process. Doing it in a shorter period will certainly jeopardize the whole, and certainly not create a result, greater than the sum of the parts.
Every great business starts with a passion - is it enough to carry it through?
This entrepreneur is absolutely passionate about her business, except that the investors are not adding value. They just want a business that is already successful. I call that the banker's approach.
What they should have told her is, yes we won't fund you, but you can trademark your brand, your designs and try to license it to various manufacturers and retailers. THAT's how you TURNAROUND a passion into a possible cash flow, and then maybe a business.
That's my goal when I work with passionate entrepreneurs. I try to funnel their ideas and passion into a potential cash flow stream for them, before we explore the possibility of it being a business.
In today's world of greater citizen voices, I find the innovation process of Votizen well explicited in the presentation below, and useful for any CEO or company leader.
Indeed the innovation didn't stop a the "idea of Votizen", rather it evolved as mini-lessons were learned through the process of execution.
The new buzzword in Silicon Valley these days is "Pivot", i.e. the core of the innovation and the abiliy to rotate the innovation in different directions as mini-lessons prove successes or failures. In other words, if the initial idea for which the innovation was intended is not working out, at least, there are other alternative paths that can be taken to make the company succeed. Indeed many startups and companies did succeed with an intent different than originally anticipated.
In the end, it is all about execution. And the successful iteration process of learning from each execution step. In the not-so-distant-days, it was called "The Learning Curve".
This process is easier to drive in startups as they have no choice. It is the survival instinct. No money, innovate, learn, or die.
In medium and large companies, a complencency settles as employees do not have that survival instinct. So the CEO must do much heavier lifting to get his teamates to "incrementally improve the innovation & learn from it". The CEO finds it useful to bring in outside consultants asnew blood to drive that process. That type of talent is best when it comes from the entrepreneurial and startup environment, but is aware of constraints in an existing business.
