How To Measure The Health Of An Acquisition

Stefan Palios

Justin Ouyang has been on both sides of the acquisition table, working at Slack when it was acquired by Salesforce and now as an investor with OMERS Ventures. Speaking with ahead of his conference talk, he explained what it takes to make a post-deal integration succeed–and how to measure it.

Key takeaways:

  • Acquisition planning usually focuses on combining organizations, aligning on strategy, and merging systems.
  • Companies can measure the health of a post-acquisition integration in three categories: business performance, integration progress, and employee engagement.
  • Once you have this data, it’s critical to share it transparently within the organization to either celebrate success or address issues before they become big problems.

Buying and integrating a company is a complex process. How do you know if you’re doing it well?

Justin Ouyang has experienced the impact of this question on both sides of the table–first as an employee at Slack during its acquisition by Salesforce and now as an investor with OMERS Ventures, advising portfolio companies on acquisitions.

Speaking with ahead of his conference talk, Justin explained more about how to measure the success of an acquisition.

The ingredients of a successful acquisition

Justin explained that in the vast majority of cases, acquisition is done for one purpose: acceleration. Whether that’s accelerating a product roadmap, customer acquisition, or something else, it’s always about bringing together the two organizations to create more together than apart.

“You have to see a world where one plus one equals three,” said Justin.

While each post-acquisition integration will look a bit different from a tactical perspective, Justin explained that leadership will typically plan in three categories. The first is what he calls ‘accelerating growth.’ This could mean cross-training sales reps, adjusting go-to-market plans, beginning to merge the products into a single suite, or engaging with customers to see if they might need different offerings.

Then comes employee engagement and retention. People are often excited about acquisitions, said Justin, but that doesn’t mean they don’t have practical concerns about their role in the new, merged company. Leadership needs to make resources available, whether that’s personal discussions, one-on-ones with managers or skip-level leaders, and a lot of internally-published content about the mechanics of the acquisition with post-acquisition vision and plans.

Justin said the final step–operational complexity–is typically focused on two topics. First is merging backend systems like the CRM and HRIS to not only empower teams but also find synergies. Second is ensuring compliance and staying on the right side of legal reporting requirements.

“You want to maintain that excitement and momentum, but there's a long list of things you need to do when you get acquired,” said Justin. “Answer those questions succinctly and concisely, rather than people spending multiple days figuring out the transition versus being able to focus on doing their work.”

How to measure acquisition success

A key thing to remember in the acquisition process, said Justin, is that the two companies can’t support each other until after the paperwork has been signed. So while the planning process is critical, things will inevitably change during the integration process.

Instead of only looking at whether you could fully enact your plan, Justin said to measure the health of the acquisition in three different categories.

1. Business performance: This is all about the raw numbers of the acquisition with metrics such as:

  • Collaboration between teams.
  • Cross-selling revenue (when the Sales team from Company A sells Company B's product and vice-versa).
  • Shared revenue (when Sales reps from Companies A and B work together on a single deal).
  • Expansion with current clients into the new product suite (usually driven by Customer Success).

2. Operational integration performance: This is about the mechanics of bringing two companies together, including metrics such as:

  • How many systems have been merged (e.g. payroll)?
  • How many acquired company systems have been brought under the new company’s security protocols?
  • Whether employees have been trained on new processes arising from the acquisition?
  • Whether new compliance documentation has been filed appropriately?

3. Employee metrics: Acquisitions are difficult for everyone–even if you’re excited about it. Make sure to measure how things are going with your people, including:

  • Retention.
  • Voluntary resignation.
  • Overall employee sentiment about the changes.
  • Segmentation analysis (e.g. Leadership retention vs. Individual Contributor retention).

“That type of measuring will help you get quantitative data to help you generally understand the health of that integration process,” said Justin.

From there, Justin’s advice is to be transparent with the information. If the integration is going well, that’s cause for celebration. If it’s not, chances are people already know, so hiding it is not helpful. Instead, sharing can help align everyone on how to fix the problems rather than letting them fester.

“Once you have that information, it's incredibly useful to be as transparent as you can about that and share that so people are aware of what their watch areas are, where they're doing well, and how these teams can work together more effectively to ensure the health of this transition,” said Justin.

Learn more from Justin and other speakers at Get your tickets HERE.