Advice and Information for Finance Professionals
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Growth, Mergers & Acquisitions
February 4, 2021
4 keys to successful mergers and acquisitions
By Doug Kehring, Executive Vice President, Corporate Operations, Oracle
The pandemic has forced many businesses to make substantial changes to their operations – and make them quickly. In every industry, company leaders have had to rethink their strategies and business processes as the shift toward digital technologies and ecommerce has greatly accelerated.
I recently had the chance to talk with Jon Steinberg, founder of Cheddar, a video news network that covers innovative technologies and businesses, about the big moves that CFOs are making to return their companies to growth. One of those moves that is in their toolbox is mergers and acquisitions—an area in which Oracle has quite a lot of experience.
I began leading Oracle’s M&A practice not long after the dotcom bust, when a lot of great companies had very attractive valuations. We recognized that it was a great time to do acquisitions. Over the next 15 years, we acquired about 140 companies—and those acquisitions, combined with our organic investments, have enabled us to develop the world’s most comprehensive and innovative set of cloud technologies to help enterprise customers transform their businesses.
Executing acquisitions well and generating customer and shareholder value from them comes down to four key criteria:
- Pick the right targets. Each acquisition has to be strategic to your business. When deals are strategic, it creates the 1 + 1 = 3 scenario where you can drive more opportunity and value together than you could apart. If an acquisition doesn’t fit this model, we always walk away from the deal.
- Pay the right price. Just because an acquisition is strategic doesn’t mean you should overpay. You might get away with that once or twice, but ultimately you have to make a return for your shareholders. We are very disciplined when looking at acquisitions, and we only go forward if the price is right.
- Integrate effectively. If you leave acquisitions as standalone companies, it’s very hard to get a good return—plus employees and customers don’t see an integrated company. We aim to move acquisitions onto our systems very quickly so that within three to six months, they’re running as if they’ve always been part of Oracle. This provides the benefit of better analytics and seamless business processes, but it all costs less to run.
- Repeat. You have to decide whether you are in the acquisition business or not. It doesn’t make sense to do an acquisition every now and then because you won't build up the knowledge and experience that leads to success. We have averaged about 10 acquisitions a year, and we have dedicated M&A teams across every functional organization (e.g., tax, finance, HR and legal). We continually refine our approach after each transaction so we keep getting better and better.
In addition to M&A, Jon and I discussed research conducted by Oracle, McKinsey, and the American Institute of Certified Public Accountants (AICPA) on how finance teams can best respond to the challenges of the pandemic (the answer might surprise you), why incremental change won’t lead to transformation, and how Oracle has been able to dramatically improve its business processes in a very short time frame.
You can watch the conversation here. In the coming weeks, Oracle is sponsoring discussions between Jon and other business leaders about their strategies. On this page, you will find those videos when they are available as well as new research from MIT Technology Review and information on the four big moves that finance needs to make now.