Mergers and acquisitions (M&A) are hallmarks of the ever-evolving business landscape.
They bring together entities that often possess different cultural dynamics, operational practices, and foundational principles, and as nimble start-ups meet the established might of corporate giants, a delicate dance often ensues.
But, is it fair to expect start-ups – known for their agile and innovative cultures – to find their place within larger, sometimes bureaucratic, corporate cultures?
We sat down with John Goldie, digital M&A specialist at Valament M&A advisory to chat about the benefits of maintaining and harnessing the vivacious spirit of start-ups through the M&A integration process.
The agility of start-up culture
Everyone knows start-up culture is synonymous with agility, innovation, and a hunger to disrupt the status quo. Start-ups often operate with a sense of urgency, where rapid iteration and adaptability are vital.
This culture is characterised by quick decision-making, flat hierarchies, and an openness to new ideas—traits that often attract corporate entities looking for a fresh injection of dynamism into their operations.
In contrast, established corporations, due to their sheer size and legacy, can sometimes be encumbered by bureaucracy, slower decision-making processes, and a resistance to change.
“These attributes, while providing stability, can inhibit innovation” Goldie notes, ” and many of the sellers we work with are meticulous about understanding what life will be like for them and their teams post-acquisition.
“When you merge the dynamism of a start-up with the resources and reach of a corporation, the potential is exponential. The challenge is ensuring the start-up’s essence isn’t diluted in the process,” says Goldie.
Advantages of maintaining start-up culture post-M&A
Independence & autonomy: As the old adage goes; if it ain’t broke, don’t fix it. Typically, buyers are looking for businesses that are thriving and in full-growth, where there will be very little concern for their ability to continue operating successfully on their own.
Maintaining a degree of independence and autonomy post-M&A allows the acquired company to continue leveraging what made them successful in the first place.
Driving innovation: Start-ups are innovation powerhouses. They thrive on challenging conventional wisdom, developing new solutions, and exploring uncharted territories.
Retaining this innovative spirit post-acquisition usually provides the combined entity with a competitive edge.
Employee retention: Employees who join start-ups are often driven by a sense of purpose and the allure of a dynamic work environment. Preserving the start-up culture can help in retaining these talented individuals who might otherwise feel alienated in a more structured corporate setting.
Adaptable business model: In an ever-changing business landscape, the ability to pivot and adapt is crucial. Start-ups excel at this. Post-acquisition, this agility can help the merged entity to quickly respond to market shifts.
Blending the best of both worlds
So, how does one ensure the start-up spirit remains alive and thrives within a larger corporate structure?
“The answer lies in striking a balance—leveraging the strengths of both entities without compromising on what made the start-up unique in the first place,” says Goldie.
Goldie, drawing from Valament’s years of experience planning and overseeing post-acquisition integrations, notes: “The key is great communication and having both parties recognise each other’s strengths. While the corporate side brings in resources, assistance with scaling, and market reach, the start-up contributes innovation, agility, and a fresh perspective.
“The way we see it, the best integrations are those with the most minimal changes to an acquired entity’s chemistry and workflow. As they say ‘if it ain’t broke, don’t fix it’.”
Keeping the independence intact post-M&A
One of the emerging trends in successful M&A is the recognition of the value in letting an acquired company continue to operate independently. The rationale behind this is simple: let companies do what they do best.
This approach embraces the idea that if a company is thriving, it’s doing something right, and it’s essential to keep that momentum going.
“The overarching philosophy here is non-interference,” explains Goldie. “If a company is excelling, it’s due to their unique approach to their business, team dynamics, and organisational culture.
“To retain these aspects, it’s often best to allow them to operate independently, only ensuring high-level communication and regular reporting to keep the buyer informed.”
Clear benefits for the buyer
This hands-off approach offers numerous benefits for the buyer.
It allows the acquired company to maintain its innovative edge, unhindered by new organisational structures or changes in leadership. It helps in retaining the employee base, as they continue to work within a familiar environment.
Furthermore, it promotes the continued growth and success of the company by letting it stick to its proven strategies and operational methodologies.
One of the clear benefits this approach yields for the buyer is the capacity to focus on their core business. By avoiding the complexity and potential turmoil of integration, buyers can concentrate on their own day to-day operations, ensuring stability and growth in their primary areas.
“For the buyer, it’s about balancing oversight with autonomy,” Goldie adds. “It’s about providing support and resources when needed, and stepping back to allow the start-up to continue its natural progression. This balance can lead to optimal outcomes for both parties, fostering growth, innovation, and profitability in the long run.”
Thriving in autonomy: The AdCash journey
When it comes to highlighting the merits of letting an acquired company continue to run independently post-acquisition, the AdCash deal brokered by Valament in 2022 stands out as a sterling example.
“The AdCash deal was a brilliant display of finding balance and synergy,” Goldie shares.
In this transaction, a thriving ad tech business based in Estonia was successfully led through the M&A process by Valament. The objective was clear: ensure that AdCash, even after the acquisition, would continue to operate independently, maintaining the driving forces behind its success.
Fast forward nearly a year, and the decision has proven to be a resounding success. AdCash continues to operate with the same independence and innovative spirit it always had, underlining the effectiveness of the non-interference approach in M&A.
Despite the change in ownership, AdCash has remained true to its roots, allowing the business to flourish, and its growth trajectory has not just remained steady, but has aggressively surged forward.
“It’s about letting the acquired company do what they do best, without interference,” Goldie continues. “AdCash’s continued growth and success post-acquisition are living proof of the practicality of this philosophy in M&A transactions.”
This method has not only allowed AdCash to continue excelling in its field but has also permitted the buying company to focus on its core operations, reaping the benefits of the acquisition without the potential destabilisation that can come with trying to merge two different corporate cultures and operational models.
Goldie concludes: “In essence, the AdCash deal symbolises the epitome of strategic M&A success – a scenario where both entities are enjoying growth, innovation, and profitability, all while respecting each other’s autonomy and unique organisational ethos.”
Charting the course for M&A success
“In the intricate world of M&A, the essence lies in balance and respect post-acquisition,” avows Goldie.
By permitting firms to retain their independence and unique operational styles, the process yields a synergy, where the combined entities enjoy sustained innovation, agility, and growth.
This stance, epitomised by the AdCash transaction, heralds a shift towards a more hands-off approach in mergers and acquisitions.
Mergers and acquisitions are not just financial transactions; they represent the coming together of people, cultures, and visions. As the digital landscape continues to evolve, especially in sectors like iGaming, digital media, and ad tech, the need for agility and innovation has never been higher.
In this context, it’s not just desirable but essential to keep the start-up spirit alive post-acquisition. As Goldie summarises: “In the world of digital transformation, it’s not the big fish which eats the small one; it’s the fast one which outpaces the slow one. And therein lies the true power of integrating the start-up spirit into the M&A process.”
As M&A transactions will continue to be driven by strategic and financial objectives, the reality is that the importance of cultural alignment and integration cannot be overstated.
Put simply, it needs to be a great fit, and as businesses strive to navigate the complexities of the modern digital world, the secret to enduring success probably lies in harnessing the power and dynamism of the start-up spirit.
John Goldie is a senior M&A advisor at Valament, a leading digital M&A advisory specialising in iGaming, digital media, and ad tech.
He has been involved in the digital marketing industry since 2006, both advising on and managing a wide range of strategic acquisitions across different verticals.
His specialties include search engine optimisation, conversion audits/analysis, CRM programmes, as well as business development.