How Industrial Companies Can Optimize Acquisitions

In an article for National Defense Magazine, Guidehouse shares five warning signs of a failed acquisition

Companies often use acquisitions to strengthen their place in the market and speed growth. However, according to The Harvard Business Review, over 70% of acquisitions fail, with the inability to live up to advertised outcomes cited as a top reason. 

In an article for National Defense Magazine, John Walker, managing director at Guidehouse, said the rationale CEOs often give for an acquisition is the very thing they mess up in execution — leveraging capabilities and exploiting synergies. To capitalize on the benefits sold to Wall Street, Walker said CEOs of industrial companies should watch for several warning signs, including:

  • Unfamiliarity with R&D operations and investment capital
  • Inability to conceptualize leap-forward combinations of capabilities
  • Lack of integrated R&D operating model
  • Focusing only on items that support core functions of the business without addressing the core function itself
  • Planning functions that are too slow to act

"CEOs tend to think in terms of broad market impact and financial return," Walker said. "Certainly, this is a good starting point, but to really understand value in the eyes of the market one must build competitive advantage from the bottom up." 

Walker added that CEOs need to know where the market is going or likely to go. Once the tactical steps are taken, he said, "the hard work begins of identifying combinations of skills, capabilities, technologies, and products that can leap-frog the competition." 

Read the National Defense Magazine Article

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