How Do Acquisitions Help Companies Grow and Innovate?
- More than ever, companies need to embrace a growth mindset.
- Acquisitions and partnerships can accelerate growth and keep companies competitive.
- Combining company cultures should be paramount, elevating best practices for more seamless integration.
At some point in their journey, business leaders are faced with decisions about how to grow their companies. Should they build new offerings in-house or buy a company that’s already doing the work they need?
If decades-old movies like Pretty Woman or Wall Street are your main source material, acquisitions may seem like a cutthroat, complicated business. But they don’t have to be that way. Acquisitions can create opportunities for companies to unite their goals and dreams, as well as help them grow.
That said, acquisitions are not a risk every company is willing—or able—to take. For those that do, bringing another business into the fold can quickly add value, accelerate innovation, and yield a competitive advantage that would take much longer to achieve on their own.
Companies look to join forces for any number of reasons, such as increasing future capabilities, increasing a customer base, or expanding their offerings into a new geographic location.
I arrived at Autodesk thanks to the acquisition of a company I co-founded called Linius Technologies. Now, on the other side of the equation, I have the opportunity to oversee exciting acquisitions that expand Autodesk’s capabilities, accelerate our product roadmaps, and expand the total addressable market (TAM). There is a talented team of engineers here who can build almost anything. But just because they can doesn’t mean that’s the best route. Acquisitions can keep your employees focused on what they do best by finding an existing business that adds value to your organization.
As companies adapt to the ongoing COVID-19 pandemic, acquisitions are skyrocketing. In the first six months of 2021, global mergers and acquisitions activity hit $2.4 trillion, a 158% jump from June 2020. Companies are taking greater risks and betting on a strong recovery. A similar trend happened after the Great Recession. According to the Harvard Business Review, companies that invested in acquisitions during this financial crisis saw business performance surpass companies that did not.
Questions to Ask When Considering an Acquisition
Before embarking on a corporate shopping spree, there are a lot of factors to consider. Leaders need to ask important questions:
- Will this acquisition add value to our company?
- Is it more cost-effective to build in-house or to buy a separate entity?
- How will our customers and our employees benefit from this?
- Does this acquisition accelerate our product roadmaps?
- Do the company’s strategies and goals align with ours?
- Will this acquisition help us fill the gaps to better serve our customers?
- Will this addition help us solve problems in a sustainable way?
- Will the new employees add to our culture, and can we retain them?
- Will this opportunity enable us to reach new customers or new markets?
- Does our company have assets or skills that can help the acquisition company grow faster (so that “1+1>2”)?
The tide is changing in the world of architecture, engineering, and construction (AEC). Digital transformation has accelerated, and more companies are moving to connected technology and cloud-based ecosystems. This will only increase with President Biden’s multitrillion-dollar infrastructure plan, which supports digital technology such as BIM (Building Information Modeling). There is also a rise in convergence, which creates a space for companies to come together to build more powerful platforms. Acquisitions fast-track business strategies, enabling companies to disrupt the industry before the competition does.
Embrace a Growth Mindset
Companies look to join forces for any number of reasons, such as increasing future capabilities, increasing a customer base, or expanding their offerings into a new geographic location. Ultimately, it all boils down to growth.
Every company should embrace a growth mindset. That often requires taking some risks, finding the boundary of your comfort zone and stepping over it. If you’re too comfortable, you’re not taking enough risk. Some companies focus on building their own products in-house and expanding in incremental steps. An acquisition or a partnership can accelerate growth by enabling a company to take bigger leaps.
Partnerships, like companies joining forces to work on a project or one company investing in another, offer an alternative to acquisitions. Partnering is a bit like dating. It’s a period to feel out whether it’s a good match with potential for acquisition. Deloitte predicts more AEC companies will seek out partnerships this year, especially with the public sector. Autodesk has a long history of partnering with companies, dating back to the earliest days of the Autodesk Developer Network and continuing today with Forge and the cloud ecosystem. For important partners such as Aurigo and SpaceIQ, we even consider a strategic minority investment to cement the relationship.
For companies considering an acquisition, it’s important to understand the industry as a whole. Read business journals and investor newsletters to see who’s buying what. Then, begin the process by looking at your own business strategies and identifying gaps relative to customer needs, as well as gaps relative to the competition. Find companies that fill those gaps as potential candidates to join your brand.
Don’t Reinvent the Wheel
There’s a natural tendency for people to think they can build it all themselves. But creating a new technology internally isn’t always an option—it can be an expensive, time-consuming process that requires additional resources and new skills and diverts time and energy away from known outcomes. In addition, consider the time, expense, and likelihood of building the entire business, including customer service, support, sales channels, marketing, and so on.
If there’s a company out there with a proven track record that integrates well with your goals, there’s no need to reinvent the wheel. An acquired innovation or technology can complement your existing portfolio and accelerate work that you’re already doing.
Take time-to-market into consideration. Expanding Autodesk’s technology offerings into the world of water utilities would have taken years to design, test, and get to market. By acquiring Innovyze—a software platform for the design, construction, operation, and maintenance of water infrastructure—Autodesk gained a proven portfolio of products that enhanced our civil engineering BIM (Building Information Modeling) products, accelerated our digital-twin strategy, and instantly added a team with 35 years of subject-matter expertise and industry brand credibility
Start-ups can also be a good investment. Autodesk recently acquired Spacemaker, which creates artificial-intelligence software for building cities smarter and more sustainably. Although an early-stage company, Spacemaker augments our work and expands our reach into urban spaces and real estate development with its nascent offerings.
Merging Cultures Seamlessly
When deciding whether to acquire a company, the evaluation process is more than just looking at numbers: It’s essential to consider the core values and culture of the other organization. Business leaders need to determine if the culture codes are a match. Will blending two workforces require significant change management, or will it be an easy assimilation? If leadership doesn’t think about that from the beginning, it can slow down the integration.
Fortunately, in today’s world, a lot of companies (including start-ups) are much more intentional about their culture than when I founded my start-up 25 years ago. As you begin discussions with the other company, do your due diligence, and you’ll get a good sense of how the culture may or may not mesh. Some of those steps include:
- Talking to the executives about what’s important to them. Look at how they treat people and make decisions.
- Looking at how the other company invests to get a sense of its values.
- Researching the company’s background. Read up on its history, and check customer and employee reviews.
Integrating the acquisition is not a one-size-fits-all approach. Going in fully prepared with all the necessary information enables a smoother integration.
3 Tips for a Successful Acquisition
Acquiring a company is a multilayered, complex process. Here are three quick takeaways that can help make it a success.
1. Create a Steering Committee
Establish a steering committee from different parts of your organization that focuses on the high-level strategic outcomes your company wants to gain from the acquisition. Aligning everyone from both companies to those outcomes helps achieve them as quickly as possible.
2. Merge the Best Elements From Both Companies
Integrate the best aspects of both companies as quickly as possible. Overcommunicate to avoid creating vacuums or voids where stakeholders (customers, employees, partners) can make assumptions or leave opportunities for competitors.
3. Cross-Pollinate Teams
By combining teams—either virtually or in person—new employees will get a good sense of the impact they can have on your company. It can also accelerate integration, facilitate collaboration, and boost value creation.
Acquisitions offer AEC companies a prefabricated business opportunity that can help them grow faster. In this digitally convergent world, acquisitions can create disruptors that lead the industry in new and exciting directions.