M&A lessons learned: Electronics industry executives share success stories
By Geoffrey James, Contributing Writer -- 4/26/2007
Other articles in our M&A series:
Lessons learned from four failed electronics mergers
Five steps to a successful global engineering project
It’s been said that acquisitions are the lifeblood of the electronics business. With talent at a premium and competition going global, it generally makes more sense to buy your way into a segment rather than trying to grow your firm organically.
And as with everything else in business, some firms are better at M&A activity than others so why not learn from the masters?
Strategy 1: Cultivate a corporate culture that values good feedback
Engineers aren’t famous for possessing strong interpersonal skills. Unfortunately, the ability to communicate clearly and effectively is crucial during times of corporate stress. Therefore, if you want acquisitions to go smoothly, lay the groundwork by training the entire organization in feedback skills, according to Barbara Beck, who was vice president of Human Resources at Cisco Systems back when the company’s culture was in gestation.
Cisco, of course, is legendary for its rapid growth by acquisition in the 1990s. Beck was instrumental during those years, creating a corporate culture that made integrating engineers seem almost effortless.
“We grew from 30 to 8,200 people over eight years, a rapid growth that would never have been possible without constant attention on improving the quality and quantity of effective feedback,” Beck explains. “In fact, during those crucial first years, we dedicated over a third of our in-house management training simply to improving feedback skills.”
Not that Cisco has always had smooth sailing. The company had difficult years, like in 2001 when it laid off nearly a fifth of its workforce. However, Cisco’s feedback-intensive culture helped it weather the hard times and return to growth, resulting in the savvy acquisition of LinkSys in 2003. “Being part of Cisco has helped enormously in putting together the infrastructure to support our long-term international growth,” says Rod Keller, LinkSys’s vice president of worldwide sales.
Strategy 2: Give the acquired engineers a plum assignment
In general, three things motivate engineers: an exciting and challenging project, access to great technology, and the belief that the organization values their contribution. Therefore, the best way to ensure that acquired engineers are happy in their new environment is to give them some interesting tools, something interesting to do with them, and then let them know they’ll be heroes if and when they deliver, according to Art George, senior vice president of the high-performance analog business unit at Texas Instruments.
George led the team that worked on TI’s acquisition of Burr-Brown in 2000 and then managed TI’s high-performance linear division, which integrated many of the Burr-Brown engineers who came with the acquisition. “You need to step back and assess the skills of the group that you’ve acquired and target them at something that’s worthy of their talents,” he explains. “When you talk about how their contribution fits within the overall corporation situation, you should emphasize the notion that the whole is destined to be greater than sum of the parts.”
Making sure that the new engineers are fully motivated has an important side benefit. Because there may be duplication of effort, an acquisition typically brings some project cancellations in its wake. But if the engineers are all involved in forward-looking efforts, they’re more likely to emotionally let go of projects that are destined bite the proverbial dust. “Keep them involved and focused on the future,” George says.
Strategy 3: Create venues for technological show and tell
Engineers have an undeniable tendency to create organizational stovepipes, so one of the challenges after an acquisition is to get the newly acquired team to start talking with the other groups and thereby build some of that proverbial synergy. To do this, companies outside the electronics industry often hold social mixers to get groups of people talking with one another. That may not work well for some engineers though.
A better approach is to put on an internal trade show that exposes the various engineering groups to the contributions and activities taking place throughout the company, according to Tim Burch, former vice president of human resources at Cadence Design Systems.
“The EDA segment of the electronics industry grows almost entirely through corporate acquisition of startups,” he explains. “The key to making this type of merger fly is communicating, to the newly joined entrepreneurs, the excitement of being part of a larger organization.”
To accomplish this, Cadence has sometimes held “employee expos” – day-long events given successively at Cadence sites around the world. “We had a large room set up with people from the different platforms, along with functional tables where all the resources in the company were explained,” Burch says. He credits these events as one reason why Cadence’s annual turnover is around 10 percent – a low number compared to the rest of the EDA industry.
Strategy 4: Gradually integrate the new talent into the established teams
Engineers are creatures of habit. While they tend to think in similar ways when it comes to technological aspects of their work, they often wear blinders when trying to understand how larger organizations work and function. Because of this, it’s easy for engineers from different corporate backgrounds to clash, not over technical details (that’s healthy conflict) but over the way that an organization should approach a problem.
To avoid a corporate culture clash, and the resulting productivity hit, take at least a year to merge the acquired engineering group into the mainstream, recommends Tom Feist, solutions marketing director for the embedded and signal processing division at Xilinx. He was a managing employee of AccelChip, which Xilinx acquired a little over a year ago, and praises Xilinx’s management for taking the time to ensure his people had the opportunity to settle in and show what they could do, without the distraction of being forced to operate differently.
“AccelChip’s greatest strength was our testing philosophy, which assumed a one-to-one personnel ratio of R&D to Q&A,” says Feist. “By leaving us to operate independently for the better part of the year, we were able to transfer this philosophy to the rest of Xilinx, which is now reaping the benefits.”
The hands-off policy had another major benefit: a retention rate that any company could envy. “After a year, every engineer from AccelChip was still employed at Xilinx,” Feist says.
Don't miss another article Business Strategy featured on the trials and tribulations of companies that have experienced a merger, "Lessons learned from four failed electronics mergers."© 2009, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.