{"id":44494,"date":"2023-10-20T15:36:25","date_gmt":"2023-10-20T15:36:25","guid":{"rendered":"http:\/\/startupsmart.test\/2023\/10\/20\/piece-plan-why-ma-is-like-a-game-of-chess-startupsmart\/"},"modified":"2023-10-20T15:36:25","modified_gmt":"2023-10-20T15:36:25","slug":"piece-plan-why-ma-is-like-a-game-of-chess-startupsmart","status":"publish","type":"post","link":"https:\/\/www.startupsmart.com.au\/uncategorized\/piece-plan-why-ma-is-like-a-game-of-chess-startupsmart\/","title":{"rendered":"Piece plan: Why M&#038;A is like a game of chess &#8211; StartupSmart"},"content":{"rendered":"<div class=\"td-post-featured-image\"><img loading=\"lazy\" decoding=\"async\" width=\"445\" height=\"352\" itemprop=\"image\" class=\"entry-thumb\" src=\"\/wp-content\/uploads\/2015\/08\/l_chess_445.jpg\" alt=\"\" title=\"l_chess_445\"><\/div>\n<p>Leading a company is similar to chess. Tactical moves on the chessboard are sometimes obvious but long-term strategy determines the winner.<\/p>\n<p>&nbsp;<\/p>\n<p>As companies grow in scope and scale, they should consider Mergers and Acquisitions (M&amp;A) as part of their corporate strategy. In my 20-plus years in the technology industry, I have first-hand experience in a multitude of M&amp;A situations:<\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li>at a hardware startup\u200a\u2014\u200a<i>being&nbsp;acquired<\/i> by a large multinational<\/li>\n<li>at a dot-com startup\u200a\u2014\u200a<i>operating<\/i> through the merger of two companies<\/li>\n<li>in an operational role\u200a\u2014\u200a<i>integrating<\/i> with acquired teams<\/li>\n<li>in a corporate development role\u200a\u2014\u200a<i>evaluating<\/i> target startups<\/li>\n<li>as an executive sponsor\u200a\u2014\u200a<i>identifying and closing<\/i> of acquisitions<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>Having been on both sides of acquisitions, I\u2019ve observed distinct patterns of successful strategies. This includes my most recent experience:&nbsp;three months have passed since Bigcommerce completed its&nbsp;first-ever acquisition<b>.<\/b> On this milestone, I\u2019d like to share my thoughts on building a successful and consistent acquisition strategy.<\/p>\n<p>&nbsp;<\/p>\n<h2><b>What is strategy?<\/b><\/h2>\n<p><b><br \/><\/b><\/p>\n<p><b><\/b><\/p>\n<p>Don\u2019t begin with the question&nbsp;<i>\u201cWhat can I acquire?\u201d<\/i> That is a solution looking for a problem, and will lead to a schizophrenic targeting of your entire ecosystem.&nbsp;<i>This is the exact opposite of a strategy<\/i><b>.<\/b> It\u2019s the equivalent of scanning the entire chessboard for pieces to capture, without considering subsequent moves by you and your opponent.<\/p>\n<p>&nbsp;<\/p>\n<p>A principled approach begins with defining your overarching corporate strategy. Where do you want to see the company in one-year, three-year, and five-year increments? When developing this vision, consider all aspects of your company including:<\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li>product capabilities<\/li>\n<li>market and brand positioning<\/li>\n<li>team and technical competencies<\/li>\n<li>sales and distribution channels<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>You should consider acquisitions only after you&nbsp;<i>define the desired future state of your company<\/i>. Set the destination of your company in 12\/36\/60 month increments. Then think about whether it\u2019s best to&nbsp;<i>build, buy, or partner<\/i> your way to these desired outcomes.<\/p>\n<p>&nbsp;<\/p>\n<p>Visualize how you want the chessboard to look and work backwards to find your strategic moves. In some cases, buying a company may be the best move you can make.<\/p>\n<p>&nbsp;<\/p>\n<h2><b>Opening moves<\/b><\/h2>\n<p><b><br \/><\/b><\/p>\n<p>Once you\u2019ve defined your company strategy, you can begin to consider acquisitions as a way to reach your goals. However,&nbsp;<i>acquisitions are not to be taken lightly<\/i>. They take time to negotiate. They also come at a cost\u200a\u2014\u200aboth for the initial deal and for the follow-on investments that are likely needed.<\/p>\n<p>&nbsp;<\/p>\n<p>Take an honest look at your company. Compare your current state with the desired state in your corporate strategy.&nbsp;<i>What aspects of your business do you need to develop?<\/i> Identify the biggest development opportunities and prioritize among them.<\/p>\n<p>&nbsp;<\/p>\n<p>It\u2019s important to find a product and\/or team aligned with the desired trajectory of your company. This can take the form of&nbsp;<i>capabilities that will take time to develop<\/i> in a market you want to enter. During my tenure at Salesforce,&nbsp;we acquired a small knowledge base company in Paris. That deal and its subsequent integration laid the foundation of the Salesforce Communities product.<\/p>\n<p>&nbsp;<\/p>\n<p>Aside from hard assets, also&nbsp;<i>look closely at the team<\/i> that you\u2019re thinking of acquiring. They may have unique expertise that you can leverage. Find out what motivates them, and if that will continue once they join your organization. Observe their team interactions; look for strong cohesion and shared ownership. Learn about their values and beliefs for consistency with yours. You want to avoid \u201corgan rejection\u201d after the deal closes.<\/p>\n<p>&nbsp;<\/p>\n<p>Once you\u2019ve identified a potential fit,&nbsp;<i>expectations need to be aligned<\/i> between you and the target company. You won\u2019t be able to strike a deal if you can\u2019t agree with the target on valuation. Avoid an impasse by demonstrating clear synergy in a proposed acquisition.&nbsp;<i>Solve for: 1 + 1 = 3.<\/i><\/p>\n<p>&nbsp;<\/p>\n<p>In the daily operations of your company, it\u2019s second nature to think of building capabilities from within. It takes discipline to also consider strategic acquisitions as a way to achieve your goals.<\/p>\n<p>&nbsp;<\/p>\n<p><b><\/b><\/p>\n<h2><b>Middle game<\/b><\/h2>\n<p><b><br \/><\/b><\/p>\n<p>Identifying the right team for acquisition is only the beginning of the process. You have to close the deal, which means convincing the target company that they should join your cause.&nbsp;<i>Clearly articulate the potential of the combined team<\/i>, and how much you can achieve together. Explain how their ambition as an independent company is consistent with the goals of a combined entity.<\/p>\n<p>&nbsp;<\/p>\n<p>The deal has to make sense for both the target and the acquirer.&nbsp;<i>It boils down to identifying synergy between the two companies.<\/i> You\u2019re asking the other company to cease independent operations;&nbsp;<i>your shared mission has to be compelling<\/i>.<\/p>\n<p>&nbsp;<\/p>\n<p>While I was at Twitter, we identified the importance of continuous education of our engineering team. Our solution was to acquire a technical training company to create&nbsp;Twitter University \u2014\u200aa training resource not just for our own staff but also for the community. This was a departure from the target company\u2019s mission, but was compelling due to the broad impact we provided.<\/p>\n<p>&nbsp;<\/p>\n<p>After completing the acquisition, the job of&nbsp;<i>integrating the target company<\/i> begins. This requires having a plan for all of the following:<\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li>how the acquired&nbsp;<i>employees<\/i> will report into your team<\/li>\n<li>if the acquired&nbsp;<i>product<\/i> will continue to be sold<\/li>\n<li>what to do with the&nbsp;<i>customers<\/i> of the acquired company<\/li>\n<li>which aspects of the acquired&nbsp;<i>technology<\/i> will be used or rebuilt<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>Don\u2019t think of an acquisition as a panacea. The work of integrating an acquired company can take anywhere from&nbsp;three to six months before you begin to realize any benefits. There will always be complications of either winding-down or transitioning the customers from the acquired business.<\/p>\n<p>&nbsp;<\/p>\n<p>Also don\u2019t forget that your moves are only part of the game. If you engage in an acquisition, you need to anticipate the moves and countermoves of your opponent. That is the art of strategy.<\/p>\n<p>&nbsp;<\/p>\n<p><b><\/b><\/p>\n<h2><b>End game<\/b><\/h2>\n<p><b><br \/><\/b><\/p>\n<p><b><\/b><\/p>\n<p>You can only&nbsp;<i>evaluate success after the integration is complete<\/i>. Only then will you know whether your calculations of expected value were correct.&nbsp;<i>Has the acquisition resulted in new capabilities or time-to-market opportunities?<\/i><\/p>\n<p>&nbsp;<\/p>\n<p>You\u2019ll also begin to&nbsp;<i>understand the human potential<\/i> of the completed deal. Based on the early results from the team, decide if you should invest even more in this area.&nbsp;<i>Are the acquired team members thriving as part of your organization?<\/i><\/p>\n<p>&nbsp;<\/p>\n<p>After three months, I\u2019m pleased to say that the&nbsp;first acquisition by Bigcommerce has been a success. We\u2019ve expedited the development of crucial platform technology for integrating with key partners. We\u2019ve also added great talent to our team. In fact, the acquired team members have become leaders within our company; we want to staff a team around them!<\/p>\n<p>&nbsp;<\/p>\n<p><i><\/i><\/p>\n<p><i>It\u2019s a common belief that most acquisitions are not successful.<\/i> The best way to tilt the odds in your favour: perform thorough due diligence on your acquisition targets. Don\u2019t shy away from acquisitions. The best players think through all the possibilities.<\/p>\n<p>&nbsp;<\/p>\n<p><i>This article originally appeared on<\/i> <i>Medium<\/i>. <i>Ron Pragides is SVP, engineering at<\/i> <i>Bigcommerce<\/i><i>.<\/i><\/p>\n<p>&nbsp;<\/p>\n<p><i>Raising your<\/i> <a href=\"startupschool\/events\/hacking-your-first-investment-round\/\"><i>first round of capital<\/i><\/a><i>? Starting a<\/i> <a href=\"startupschool\/events\/secrets-of-successful-crowdfunding\/\"><i>crowdfunding campaign<\/i><\/a><i>? Want to grow your business<\/i> <a href=\"startupschool\/events\/how-to-use-instagram-to-grow-your-business\/\"><i>with Instagram?<\/i><\/a> <i>StartupSmart School can help.<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Leading a company is similar to chess. Tactical moves on the chessboard are sometimes obvious but long-term strategy determines the<\/p>\n","protected":false},"author":1,"featured_media":59225,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27,23,1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/44494"}],"collection":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/comments?post=44494"}],"version-history":[{"count":0,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/44494\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media\/59225"}],"wp:attachment":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media?parent=44494"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/categories?post=44494"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/tags?post=44494"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}