One way or another, people are unequivocally the key to a successful business acquisition. In the Recruitment industry this premise holds as strongly as in any industry. It is people who have the critical relationships, are central to the business transactions and who, together, form the culture of any organisation. However, it is the leadership of the organisation that galvanise these things together.
During a business acquisition the actions of the organisational leaders can dictate the success or failure of the venture. Integrating a newly acquired business almost always means aligning different cultures and approaches; "the way things are done around here". The greater the frequency and magnitude of change that is occurring the more important leadership becomes. It can become a "make or break function". What leaders do during mergers and acquisitions has a significant effect on how employees of both companies react and promote a sense of common unity and purpose.
Organisations that have a high degree of leadership visibility and involvement during the M & A process are well on the way to a successful outcome. Leaders set priorities and create the positive business momentum and discipline required during M & A transactions and post- merger integration.
Some mergers or acquisitions are highly time-consuming and can de-focus the attention of key staff. Leaders whose statements and action inspire a shared sense of purpose enable employees to remain engaged on their work during the time of transition and integration. There has to be a business as usual ethos as the process rolls out.
Related: What Can We Learn From Great Leaders
In our experience at HHMC, we believe that there are many senior executives who demonstrate outstanding leadership qualities within the Recruitment Industry in Australia and New Zealand. Those corporate executives, as well as many business owners, have mature, structured approaches to acquisitions and are sensitive to the importance of the cultural differences in organisations they are acquiring and to the value that those differences can bring. We see the success of their approach in the outcomes achieved for all the key stakeholders; the selling vendors, employees on both sides, and shareholders.
Things do go wrong of course and the mistakes are occasionally given some public exposure. Mostly, during the last ten years there has been an ever increasing sophistication in the management of mergers and acquisitions in our domestic markets.
Small Business Leaders
I would like to look at the flip-side of leadership and its impact on selling a recruitment business. The great majority of recruitment firms in Australia and New Zealand are relatively small, certainly defined in the small business category, and led by someone with varying degrees of entrepreneurial flair. These are the attributes that get the business up and running, wins clients, hires staff, pays the bills and produces revenue and profit. There are certainly some outstanding successes and examples of leadership in innovation and enterprise throughout the industry. What happens when businesses that have been led by dominant leaders are up for sale? It means that there are potentially some issues to face.
Business owners that continue to be critical to the company's functioning, results and future direction can't easily walk away. The risk to a buyer is that allowing the key person to depart too quickly, even with an earn-out provision, may leave them floundering. Staff may resign or become unsettled, clients depart, profile declines and then it is an acquisition that already looks expensive.
Most SME business owners implicitly understand this but sometimes have trouble removing themselves from some of the key person's activities. They enjoy it and have done for years so it is hard to hand it over and develop others who might not do it quite the same way as them. The problem for them though is when they decide it's time to look for a buyer there may not be one that is prepared to take the risk that the business will be sustainable once they have departed.
Ultimately, it is part of the business leadership cycle to delegate responsibility and authority to others capable of growing the business to new levels. There is nothing wrong with running the business the same way that it has always been, through the efforts, drive and relationships of the owner, just don't expect to be paid as much you may anticipate when you want to sell.
Buyers know that the founders of a business almost always want to move on post-sale in a reasonable timeframe. What they need to know is that there are new leaders in the business who are capable of stepping up and taking the business forward.
Originally Published in Recruitment Extra November 2011