Mergers and acquisitions are an eventuality that most small and medium sized companies should brace for. While building a solid business model is essential to gaining the tag of a successful entrepreneur, scalability in many sectors can only come by when mergers take place.
But a successful merger that benefits both the seller and the buyer can only come by, when a proper plan is put in place, to integrate the services of the acquired company in a seamless manner.
“Consolidation is inevitable as the markets are not as deep as everyone fights for a small pie,” said Dhruv Agarwala, co-founder PropTiger whose company bought two varied models within the real estate sector last year, Housing.com and Makaan.com.
Prepping for the Exit
The first step entrepreneurs need to do is to make themselves aware of the reality, that their company will be taken over. Part of this process includes sensitizing the entrepreneur on what will happen next.
“We have a challenge in india when it comes to exits,” said K Ganesh of GrowthStory at a recent event in Bengaluru. ”Entrepreneurs don't like to detach themselves from their ventures and don't want to exit as they are emotional. But in the larger context you need to think about monetisation if you want to scale up your company,” he added.
The Right Fit
.A successful and balanced M&A needs to have both the buyer and the entrepreneur on the same page. Those acquiring in particular need to think if the fit is right or not, so that they don’t regret it later on.
“We saw housing as a great opportunity as it was a demand aggregator and PropTiger has the transactional capability,” says Agarwala about why his company zeroed on Housing.com fro acquisition. “What attracted us about housing was their great product which built a sizeable brand name for itself, but failed to get revenue traction. That is the where we thought we can help,” he added.
The Importance of Integration
Mergers can be initiated due to various reasons. While most of the times it is forced by investors but there are cases where scalability and growth urges a founder to think of joining his/her company with another.
In any case, it is necessary for the acquired company to feel part of the parent group while having its own identity intact. Agarwal feels acquisitions which are regretted later are often overshadowed by the deal fever that takes focus away from key elements of the acquisition.
“Keep in mind about the eventual integration from the very beginning” advises Agarwal.
He explains how his company laid out a blueprint before doing the deal to not have a regret the day after making the deal. This included the organizational structure well before going ahead with the deal.
“Most important however, is cultural integration. It was a big challenge as they were product oriented and we were executing oriented. But it worked out well for us,” said Agarwal.