LESSONS LEARNED ABOUT INTEGRATING ACQUISITIONS The acquisition of Tektronix's printer division taught Xerox executives a great deal about successful integration. Here are 26 of those lessons. John Vester OVERVIEW: Despite the evidence that most acquist- tions fail to add value tothe acquirer, an acquisition can he successful by following a disciplined imegration pro- gram based upon best practices. A solid strategic foun- dation that explains the “why” of the deal is the right place to start customizing the integration process for ‘maximum value capture. Afier the process is ereated, i should be followed rigorously. While speed is essential, quality is paramount: in fact, excellence at each stage of the integration cumulatively increases the odds of And don't forget the major inpact of simple actions like CEO visits. By following these guide- lines you can weather the inevitable surprises that sink ‘many acquisition integrations overall success. Recent studies indicate that only one in five acquisi tions—high-tech or otherwise—actually add value to the acquiring corporation over time. In other words, up to 80 percent of all acquisitions fail (J,2,3) Xerox spent the second half of the 1990s considering several acquisitions that would establish the com John Vester is a vice president at Xerox Corporation in Stamford, Connecticut. He recently joined Xerox's e-business and tele-operations. Prior to this, he was vice president of strategy’ and business development, where he played a central role in establishing Xerox's strategic position in the office printer business. He was respon- sible for authoring the initial study to buy Tektronis's primer division and then had world-wide responsibility for integrating this business with Xerox. Prior to joining Xerox, he was a management consultant at McKinsey & Co., where he led strategic restructuring, turnaround, and operational improvement programs, primarily for technology-based and industrial clients. Before MeKinsey, he held positions of increasing responsibility at several industrial concerns. He holds an M.B.A. in finance from Cornell University and an MS.E.E. in systems design from Yale University John.W.Vester@usa.xerox.com a major player in the networked color printer market. By ‘mid-1999, itappeared that a deal would finally be struck It was to be the biggest acquisition of its kind for Xerox—a real “win,” I had suspected that it would take ‘months, maybe even years, to successfully knit Xerox and the acquired company together. By all accounts, it appeared thatthe integration was going to be a thankless, anonymous task. I felt sorry for the poor soul who would be chosen to manage the innumerable day-to-day inte~ sation details of this new bu Imagine my consternation when L learned that I was to be that poor soul! But motivated by my awareness that 4 out of 5 ofall acquisitions fail, | was determined to help put Xerox among the 20 percent that integrated a complex, global, strategic acquisition successfully by leading an essive, disciplined program of integration based ‘upon best practices From this experience, I have codified 26 success factors in six major lesson categories for others who might be attempting major technology acquisitions. The six eat- egories are the management framework we followed in our own integration, It is called FIDESS for: Focus, Innovation, Discipline, Excellence, Speed, and Simplie- ity (see Figure 1). After reviewing the 26 lessons we earned, | also briefly describe some of the inevitable surprises we encountered along the way. 1. Focus Our project started with the advantage that Xerox had recently conducted two other high-tech acquisitions, which I could study and lea from. I received a lot of helpful advice from my colleagues who ran these efforts, while consultants also dropped thick tomes on me that summarized their hard-won lessons 4,5). Further, linsti- tuted a literature search for useful “how-to” artieles Whit I learned was: 1) there is not much in the published literature that can help, and 2) we had at least gotten the first step right; we had done a solid strategic analysis of why this acquisition would add value to our existing printer business and to the corporation. In fact, it ‘May—June 2002Com- L Firm bined t 26 BEST PRACTICES ‘SIMPLICITY ‘SPEED ‘EXCELLENCE DISCIPLINE INNOVATION Focus Ee Company A | [ Company B oe im Figure 1.—Best practices from the Xerox integration framework provided the foundation for the acquisition feasi analyses and due diligence efforts. ity This is the first major lesson: Laser-sharp focus on the business rationale and on the drivers of business value at the outset is essential for a successful deal. It helps everyone to understand the “why” of the undertaking. It also provides guiding principles for the major areas of management attention. 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