Effective M&A: Six key ingredients for a successful acquisition strategy

That platform business might already exist, you may even be running it yourself. Or you might need to build it from scratch. Either way, before you can embark on a buy-and-build strategy or adding bolt-on acquisitions to your platform, you need to ensure it is set up and ready to integrate other businesses. That means having a suite of well-resourced functions, including financial reporting and accounting, legal, compliance and other operations. It also means having an effective management team in place to execute your plan.

The right partner can not only help to finance that platform deal and follow-on acquisitions, they can also help you build that platform from scratch, often through the carve-out of an asset or business from the parent company.

In 2017, Oakley acquired the assets and operations of Plesk in a complex carve-out from Parallels International GmbH, supporting management to build standalone financials and operations to ensure the business could operate as an independent entity. A year later, Oakley combined the business with cPanel to create a market-leader in web hosting server management.

What is the goal for the business, where do you want it to be in five years’ time? This will help you to map out your M&A master plan: can you achieve your strategic goals through organic growth or would it be faster and easier to pursue acquisitions to grow your market share, internationalise your business or launch new products and services?

Adding cPanel to our Plesk platform brought access to the lucrative North American market and helped increase the business’ scale and market power, ahead of a sale to CVC in 2019.

Meanwhile, by combining Spain’s Ekon with Portugal’s PRIMAVERA in 2021, Oakley created Grupo Primavera, the leading independent provider of business software in Iberia. It is helpful to consider: who might be the next partner for your business in five years’ time, and what will they be looking for? For Primavera, our acquisition strategy combines increasing segment coverage (customer size and verticals) and augmenting the product offering to create a coherent single-entry point into Iberia for large-scale consolidators in the European business software sector.

Your business may operate in a fragmented market that is ripe for consolidation. Deep sector screening will help you identify the hidden gems you could combine your company with, but assessing potential partners will eat into your bandwidth (and your financial partner’s) just when you need to focus on growing your business. It will be important to prioritise the right opportunities.

In 2020, Oakley invested in over-the-counter consumer healthcare business Windstar. Windstar is the ideal ‘plug-and-play’ platform with a strategy to scale its business through accretive acquisitions. Our deep sector analysis had identified ‘clean beauty’ as a high-growth segment within the global beauty and personal care market and in 2021, Oakley backed Windstar to acquire L.A.B. Cosmetics, a clean beauty business whose products are free from harmful chemicals.

This includes the credibility of your team as well as the credibility of your platform. Windstar had to demonstrate to the founders of L.A.B. that its business and brands would find the best home on Windstar’s platform. But the founders were also attracted to Oakley’s deep experience and track record building digital businesses and helping companies expand internationally.

Teaming up with the right private equity backer can complement and augment your credibility in a particular sector or geography, as well as win you access to their network of industry experts and entrepreneurs. The original acquisition of Plesk was a proprietary opportunity sourced alongside Thomas Strohe and Jochen Berger, who had previously partnered with Oakley on web-hosting portfolio company intergenia.

Thomas and Jochen brought significant knowledge about the hosting markets in which Plesk operated and later helped to unlock the acquisition of cPanel, leveraging their trusted relationship with the company’s founder, Nick Kosten.

M&A can be fast-paced, especially in an environment with plenty of dry powder chasing fewer deals. That means you may need to move quickly when the right opportunity appears. Getting steps 1-4 right will allow you to move with conviction.

Following an education sector mapping exercise and building on our strong track record in education, Oakley identified the opportunity to create a market leader in maritime e-learning: Ocean Technologies Group was created in 2019. This was a highly complicated transaction where we simultaneously bought two companies that had been long-standing competitors for 30 years, Norway-based Seagull and Videotel, part of a publicly-listed US group, and merged them into one platform business.

Being able to demonstrate deep sector knowledge boosted our credibility with the management teams at each company, while our ability to deliver synergies gave us the confidence to combine the businesses. Ocean has since completed five further add-on acquisitions as the business begins to consolidate the fragmented maritime software market.

Integrating duplicate functions helps deliver the synergies that can underpin a business combination. Our merger of Germany’s two leading online dating sites Parship and Elite reduced significant marketing spend that each company invested to compete against the other. That doesn’t mean 100% integration always makes sense. It will necessarily vary depending on the type of business you are combining and their underlying assets.

While we created a new, overarching corporate brand in Ocean Technologies, we maintained separate product brands and management teams for Seagull and Videotel, to take advantage of each business’ strong customer loyalty.

Finally, whatever business you might acquire, be mindful of the need to integrate different company cultures. Communicating your vision and rationale for the business combination, and incentivising leaders to win their support, can help reduce the risk of a ‘culture clash’ that undermines your M&A strategy.