Nicholas Anderson is CEO of FTSE 250 stalwart Spirax Sarco, a world leading manufacturer of steam and thermal valves. When Anderson took the top spot at the Cheltenham-based niche engineering firm in 2013, the company’s strategy was primarily built on organic growth. It had served Spirax well – long-term compound average growth rate was, and remains, about 7%.
Anderson decided to complement this organic expansion with some choice acquisitions, including two that completed in 2017: US thermal technology firm Chromalox (bought for $415 million) and Germany’s Gestra (€186 million), which specialises in boiler control systems. Here, he shares his rationale and what he learned about getting acquisitions right.
"Our acquisitions before had usually been small bolt-ons. As the group got larger those bolt-ons were becoming less impactful – it’s the rule of numbers – so we started looking for ways of broadening our platform for continued organic growth.
You’ve got to be disciplined about why you want to do acquisitions. It took us three or four years to find the right ones. Size for the sake of size is not a good reason to acquire a business. In the long term adding value means the acquisition has to be related to the businesses you have today.
Doing your due diligence and having a clear integration plan – I take those as a given. Where I’ve seen many people fail is when they don’t pay enough attention to the business model fit, the strategic fit and the cultural fit, which can be difficult. Sometimes it comes down to gut feel."
-- Remember why you’re acquiring. Complementary purchases generally revolve around adding value so you can cross or up-sell to customers, or enter new geographies. Buying companies for market share, diversification or simple opportunism will require different seletion criteria.
-- Be patient. It’s better to wait until you find the right match than rush into a failed acquisition.
-- Expect the unexpected. You can’t guarantee you won’t have culture clash. Be particularly sensitive to cultural differences both before you buy and in your integration plan.
For more information
This article explores the pitfalls to avoid in small and medium business M&A. For more veteran insight, GCI’s Adrian Thirkill discusses the importance of being proactive and communicating, while The Brew’s Andrew Clough says you have to prepared to walk away.
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