Acquisitions and Investments

Strategic Fit

Acquirers need to fully understand why an acquisition is desirable or necessary. This begins with a clear understanding of the gap in market potential and why the gap is best filled through acquisition. When choosing targets, we can help give careful consideration to the competitive approach; segments served; and core capabilities to assure they are all consistent with the strategic purpose.

Starting with the End in Mind

Most successful acquisitions have a clear post-acquisition plan. This is more than a proforma P&L that demonstrates sufficient synergies to achieve a hurdle rate of return. It starts with a clear story about how the acquisition will contribute strategically, as well as financially, to the acquirer. Synergies need to be backed by concrete actions and timetables designed to realize the benefits, including specific plans to reduce headcount, close locations, consolidate product lines or cross-sell products.

Integrating Operations

Most proformas require immediate benefits, followed by steadily accelerating growth. Acquirers are then reluctant to rock the boat, which leads to a strong bias. This allows the acquisition to remain independent, even when the proforma called for tight operational synergies. The bias becomes stronger when significant earn outs are involved. Only after a significant gap opens between the proforma assumptions and actual results, does integration begin in earnest. Another mistake, particularly in software acquisitions, is to waste time and resources on technology integration, when the primary focus should be on business integration.

Case Study: Ubiquiti

Challenge

The automotive service sector generates over 600 million service records a year. Most capture customer complaints, diagnostic data and repairs performed. However, the data is a mixture of structured and unstructured text, codes and numbers, often written in short hand unique to the individual author or service location. Ubiquiti, a leader in high-end wireless networking products, knew unlocking this data would be tremendously valuable in improving service marketing, diagnosis accuracy and shop performance management. Ubiquiti has leading-edge text interpretation technology and 10-plus years of experience analyzing warranty repair data to feed vehicle quality management and improvement. But the company lacked the domain expertise to develop applications to serve the automotive service sector.

Empiritas Solution

Leveraging our understanding of the automotive service business, we generated a dozen applications that deploy Ubiquiti’s capabilities to new business problems. Among the most interesting applications is a consumer self-diagnostic application which allows the consumer to describe the vehicle problem and receive accurate information on likely issues, repairs, pricing and available service locations. Empiritas used its dealership, dealer service providers and OEM service operations contacts to refine the applications, tailor the solution to particular customer situation and drive the sales process. Several of the applications are currently in pilot across a broad spectrum of businesses with the potential to double Ubiquiti’s business over the next 2 to 3 years.