Manage the process
VWR divides its acquisition integration
into two phases. Phase one oversees the
first 60 days of the process, with phase
two covering the ensuing several
months. The process is designed to be
streamlined and to allow an integration
team composed of representatives from
different parts of the company to react
quickly and make course corrections as
necessary.
“We work hard not to build bureaucracies in the process,” Ballbach says. “We
try to keep it as streamlined as possible
by having a very small team that is
empowered to make very quick decisions. Folks know who those people are,
whether it’s coming from the finance
portion of the organization, from human
resources, information systems and so
on. We have a person who is responsible as the lead person for the functions on
the integration team. Everyone understands who is making the decisions.”
Ballbach says the best acquisitions get
many different kinds of people involved,
but you won’t be able to optimally leverage the skills of your people unless you
create a well-defined, start-to-finish
model for purchasing and integrating the
business.
“What happens is when you leave the
two organizations alone and don’t integrate them quickly, you end up with a
company that is not unified,” he says.
“The people don’t really know the direction, and it just leads to confusion. There
is just a feeling of not being one company. The synergies you might expect to
get just flat out won’t materialize.”
At VWR, acquisition ideas are generated in the field, as potential acquisition
candidates are identified by the company’s associates who are working directly
with customers. From that point, the
company’s investment committee, composed of senior managers and company
board members, must perform research
and build a solid financial case for making the purchase.
“The business management needs to
understand that they own the deal, that
they’re responsible for delivering and
executing the transaction,” he says.
Ballbach says you should take special
care to do extensive due diligence on
international acquisitions, particularly in
countries that might have different business standards.
“When you get into some of the emerging markets, it’s really important to make
sure that you take a good, hard look at
due diligence and some of the things that
can appear there that might be outside of
your expectations,” he says.
Ballbach has an overarching rule he follows during the due-diligence process:
Don’t fall in love.
If the research tells you the purchase
isn’t a good idea, follow the facts, not
your heart. Forcing an acquisition to
happen could have disastrous results for
all involved.
“It’s pretty easy to get the numbers to do
whatever you need them to do in order to
get a deal done,” he says. “We find that if
the economics are stressed and we just
don’t feel right about the deal, you have to
be prepared to walk away.”
To ensure that he maintains the discipline to walk away, Ballbach meets frequently with the investment committee,
following the numbers through every
step of the process, before any commitments are made.
“We have a very sophisticated financial
modeling system and are very disciplined about it,” he says. “We do lots of
quantitative and qualitative analysis. In
the investment committee, we have legal
oversight, finance and accounting oversight, and ownership oversight. I sit in
on those meetings, and we literally go
through deal by deal, so that by the time
we look at the financial models, the
investment case and the integration
plan, we feel confident that this is something we can achieve.
“Making successful acquisitions goes
back to some of the basics of running a
business. You have to focus on three
things: growth, people and process.
Without profitable growth, you can’t survive. Without the right people developed, motivated and rewarded, you can’t
be successful. Without good processes,
you cannot be an industry leader. It boils
down to those three things. You need to
have all of them.”
HOW TO REACH: VWR International LLC, www.vwr.com
