Why knowing your “Strategy & Culture” really does matter in a Dealership Acquisition

We have all heard the terrifying numbers that eighty-five percent of all acquisitions fail to add value or completely blow up!  These kinds of statements prevent most companies from pursuing acquisitions when they need not.  In the following story you will see why and how having an intimate understating of your Strategy, Company Culture, Company Values and Solid Communications Plans are the foundation to successful acquisitions and creating some serious value.

Over the years, I have led numerous dealership acquisitions in the Heavy Truck, Construction Equipment, Materials Handling and Agricultural dealership world.  In the early days, we really struggled to create synergies, grow the business, see new growth, fix operational problems, grow market share, improve profitability, and create a common culture.  These were very painful exercises that gobbled up a lot of energy. 

If our ten-year strategy of strong growth through acquisitions was to be successful, we had to start doing things different.  So, we agreed to do a very in-depth post-acquisition review to hopefully uncover the real issues behind the pain and develop a new process that would allow us to integrate acquisitions faster, better and create strong value.  Here are a few of the problem patterns we saw in previous acquisitions:

  1. The employees of the acquired dealership were in a very heightened state of anxiety and our lack of good communications was fuelling it.
  1. The new employees were starved to hear about and see our goals, our values, and our culture and we were missing that mark big-time, fuelling even more anxiety and uncertainty. 
  1. The dealers we were purchasing were built successfully under a command and control culture which was very different from our engaged and empowered culture.  This very quickly made us realize that there was a serious culture disconnect and we needed to find a way to unite the organizations.
  1. Managers were always looking for someone up the ladder to make the decisions for them, when we wanted them to make the decisions.  When given the chance to lead and make decisions the employees seemed eager at first, but they became very anxious and scared when it came time to lead.  We very quickly realized that a lot of training, mentoring, and coaching would be required to give the new group the confidence they were lacking.
  1. The employees and managers were never exposed to the full picture of financial statements, balance sheets and performance measurements.  Again, we knew some high-quality training and lots of patience would be a real benefit to the process.

These were just a few of the highly critical takeaways that we discovered during the post-acquisition reviews.  The teams that we acquired were very committed, bright and passionate employees that wanted to be more successful and were very hungry to learn and engage.

With this in mind we built, tested, and perfected over numerous acquisitions a program called simply “Strategy & Culture” and here are a few elements of what a very effective approach to getting acquisitions right should look like:

  1. The 200 Day Plan:  This detailed work plan spells out all the critical steps and strategy for the 100 days before and first 100 days after the acquisition.  These steps include due diligence work, leadership assessments, communications plans, etc.
  1. Communications: On day one we launched a full communications plan that saw our full executive team share with every employee who we were, what our history has been, what our hopes for the future are, what our values are, what our culture is and why we purchased their company.  This included an ‘as long as it takes’ question and answer session at each dealership location.
  1. Strategy & Culture – The Dealerships of Tomorrow”:  Very high impact workshops were developed for the new leadership team that started the process of aligning the Strategies, Cultures and our shared hopes for the future.   In these workshops we presented our strategy, values and culture as a refresher.  We then asked the newly acquired leadership team to celebrate with us their history, what they feel they do very well, and what their hopes are for the future.  Based on these stories and shared experiences we set out over the next few days to create their new aligned strategy and goals.  One of the most powerful training events over these few days was the “Experiential Learning” sessions where our team and theirs discovered what it means, what it looks like and feels like to be a good leader within a newly acquired organization.

I could go on for a while listing all the great things we successfully tested and the benefits we saw from this new approach, but if there’s one big set of takeaways, it’s be confident in and know your Strategy, know you Culture, know your Values, have a Plan and have a Process.

A few years ago, we acquired a multi-store group of dealerships that was performing just ok and was still operated by its original founder.  This group was one of the first to work with us on our new approach simply called “Strategy & Culture – The Dealerships of Tomorrow”.  Here are a few highlights of the first two years of our joint efforts to create a better and stronger business:

  • Market Share increased from 13% to 27%
  • No aged Whole-goods and used equipment at very low levels
  • Whole-goods profit increased from 1% to 4%
  • Parts Margins increased from 21% to 30%
  • Service Margins increased from 56% to 71%
  • Customer Satisfaction was climbing
  • Employee Satisfaction scores double in two years

The amazing thing is, the same leadership team that we acquired did all this with just a bit of support, resources and guidance from our leadership team.  Since these first two years this group of dealerships has faced two significant business downturns and have remained profitable even at the bottom of the cycle.

Now that’s what successful acquisitions should and can look like!

If you’d like to discuss how we can assist you and your business, get in touch with John Higgins, the author of this article, at jhiggins@scpg.ca