And they lived happily ever after… the M&A
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Over the last few months, I started noticing something everywhere: startups merging or acquiring one another. Some are old clients, some are potential clients, some are companies where friends work. This article comprises the collection of advice I’ve wanted to share with them before they complete the deal to make “happily ever after” a higher chance of success.
The reasons for a merger and acquisition vary: to end a resource-draining competition, to gain access to valuable client contracts, to access lucrative technology or functionality, to extend the runway for a business, and so on. One thing is common: completing the deal often just feels like it will magically solve everything!
But what happens after the vows have been recited, the champagne bubbles have flattened, and the DJ has packed up and gone home?
That’s when the real journey begins, complete with ups and downs, happy moments, lost hopes, new-found joys, and desperate decisions—something otherwise known as the process of integration.
Now, some deals are easier, these are those that don’t entail the complete merger of two
souls technical products. Nevertheless, I want to talk about these mergers in particular, where two tech products envision their future as one. 💕
Managing life after a merger
At Evil Martians, we work with around 20 startups each year. We help them solve various problems, ranging from the purely technical to cases centered on product and business. That being said, we’re increasingly being sought out for facilitating the process of post-M&A integrations involving two tech products.
Of course, there’s no silver bullet, and only one thing is certain—like any fruitful marriage, work will be required from both sides.
Let’s share some guidelines that can make this process smoother and more productive.
Assemble a product integration team
First of all, if you have serious intentions, assemble a dedicated product and engineering team with one goal: integrating the products.
This elite squad should be led, either by Head of Product, or by one of their direct subordinates (someone who has enough authority and alignment to make key product decisions themselves).
Plan out the integration before you pop the question
This is key. Before you say your vows and sign the papers, have your integration team plan and estimate the time and money necessary for the integration.
Only the engineering team can set realistic expectations about what can be integrated, what the result might look like for the end users and for the business, and what time and resources will be required to achieve that.
Don’t expect an instant miracle. Think more “cardiovascular surgery” and less “slap on some duct tape and off you go”.
The process of integration is, above all, a product development process, and an important one at that. It can easily go south, ruining the productivity and performance of your business. BCG’s research shows that one year after closing, 59% of acquirers experienced a decline in operating margin. The numbers don’t lie here: you have to be careful.
The solution to this problem is very well known: in the modern world, product development has to be a lean process. If you have it in mind that your integration has to happen as one huge release, most probably, you’re planning a disaster.
Instead of having your integration as some enormous big-bang level event, plan out small, gradual releases.
Let’s say you’re moving the functionality of the “old” product into the “new” one. First, identify loyal customers from the “old” product, in particular, those who use the most simple flow—begin with these users in focus. Do your custdev and determine which functionality is necessary for them to move to the “new” product. Then, build it, and roll it out just for this group. Collect their feedback, make any necessary adjustments, then move on to the next, bigger group (who likely be users involved in more complex flows).
Keep moving in steps like this, and then, at some point, you’ll figure out which features can be completely dropped (since they’re not really necessary for any user group).
At that stage, the integration process is effectively complete.
Seek council with experienced professionals
Consider having your integration team composed of external, experienced professionals working under the leadership of an internal product person. This external team can take the load off the core team, leaving them free to complete their existing road map. Additionally, a team like this is poised to more comfortably navigate the murky waters of integration, since they already have experience performing similar work.
Plus, there’s also another benefit here to consider that might not be immediately obvious.
During a merger, instead of choosing what is best for the new product, internal teams can be biased toward their own code and make decisions designed to gain points for themselves.
The stakes can be as high as ever in this process, and an external team with only one clear goal in mind—to integrate the products—can be quite helpful.
The modern family
Finally, why not go the other way around?
Start with the integration and only follow up with the deal if the merger of the
soulstechnical products proves viable.
It’s often the case that you can “co-habitate”, working out a way to integrate the products and start a mutually beneficial business relationship before proposing something more “serious”.
Even if you believe that the M&A is the right solution, starting with a partnership and integrating tech products early on can reveal many “unknown unknowns” and help you make a more informed decision. A happy partnership is a good indicator of a future happy merger.
Many successful mergers and acquisitions have happened after the tech products were already integrated. For instance, consider Shazam, which Apple had first integrated into Siri back in 2014, as a part of their iOS 8 release.
💍 Only in 2018, after 4 years of successful “cohabitation” did Apple make it official, acquiring Shazam.
Just getting started…
M&As are a major source of growth and opportunity: how would Google look without Android and YouTube? Or, Disney without Pixar?
Don’t be intimidated, but come prepared.
Set up realistic expectations about integrating the tech, follow through using a lean product development process, and have a dedicated product team in charge.
Relationships require hard work, and for tech integrations this is even more true—but the results from those efforts will not disappoint: you’ll become stronger and ready to tackle bigger and more ambitious goals together.
🥂 And, in any case, we’re here to help.
If you’re thinking about merging tech products, if you’ve got an issue on the backend, frontend, or beyond—Evil Martians are ready to help. Drop us a line!