The golden rule for successful acquisitions

CEO Nicholas Anderson on the essence of FTSE 250 engineering firm Spirax Sarco's M&A strategy.

by Adam Gale
Last Updated: 04 Apr 2019

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."

Key takeaways

-- 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.

Would you like to see more about acquisitions, or is there another business challenge you want Management Today to investigate? Email me (adam.gale@haymarket.com) to let us know.

Image credit: rawpixel.com/Pexels

Tags:

Find this article useful?

Get more great articles like this in your inbox every lunchtime

"Don't just jump on the NFT bandwagon"

Here’s how an art gallery successfully stepped into the NFT world - and its co-founder's...

Is it time to introduce meeting-free days?

Keeping a day free of meetings can help boost productivity and empower your employees

Rory Sutherland: What electric car manufacturers can learn from men's hats in the ...

The case for collective campaigns: why working with your competitors may be the most beneficial...

Is Boris Johnson right to say “working from home doesn’t work?”

MT Asks: With major public figures, including our very own Prime Minister, casting doubt over...

Considering an MBO? "Don’t underestimate how difficult it will be”

Two leaders who have run successful MBOs give their advice on how to get it...

Ebay's UK chief: “There isn’t a playbook you can follow”

In Conversation with....eBay UK's general manager Murray Lambell, who tells MT how he's dealt with...