Our company ServiceMax just got acquired. Here's what we learned about M&A

PTC acquired ServiceMax for $1.46 billion. CEO Neil Barua talks about how to make M&As work
Neil Barua
Neil Barua

There was a recent EY statistic I read that said 78% of CEOs will look to conduct mergers and acquisitions (M&As) in countries geopolitically and economically aligned with their home country, this year. The report refers to this as “friendshoring”, a deglobalisation reaction to our post-pandemic challenges and uncertainties. It’s an interesting idea, in that it feeds directly into how businesses should approach any M&A in the first place. If you don’t minimize risk and ensure there is synergy between your products, people and customers, then the chances of that M&A succeeding diminish considerably.

According to PwC, we are currently in a “sweet spot for M&A” but this could also mean a lot of pain and failure if businesses do not get the integration right. Traditionally, M&A integrations struggle. While PwC suggests that companies need “well-thought-out strategies”, it also warns that they may need “courage.” In reality, you need a mix of everything but above all, there needs to be a focus on people. Being acquired creates heightened states of excitement and tension. Recognizing how this impacts employees and customers and realising there is no one-size-fits-all approach is fundamental.

Firstly, any M&A should be customer focused. Understanding how customers view your M&A is so important to its validity and success. Understandably, customers will want to know how an M&A impacts their investments in your products and services. It’s a moment of risk, so communicating with customers early (even before preferably) in the process will help to manage that risk.

I’m the former CEO of ServiceMax and current President of PTC’s Service Lifecycle Management group. ServiceMax provides cloud-based software and mobile apps that give customers a complete view of their equipment assets to field service teams. We were acquired by PTC earlier this year. It’s a good fit as PTC can now extend its Product Lifecycle Management software into Service Lifecycle Management. When PTC bought ServiceMax, there was no immediate change and there won’t be for at least six months. It’s a policy of ‘do no harm,’ watch and learn and see how each organization works. It provides some stability for employees and customers and gives leadership teams an opportunity to fine tune plans.

While ServiceMax had its own acquisitive M&A strategy, this is now the second time my organization has been acquired. (GE Digital purchased the company back in 2017 for just under a billion dollars before selling it to a private equity firm when they restructured a few years later). I’ve experienced both friction and frustration as well as excitement and alignment.

What underpins everything here is communication. How each organization presents the deal and post-deal plans to employees and customers has to be open and positive. Clear lines of communication, from the top down but also horizontally across both organizations are essential. This doesn’t happen by magic. It has to be managed to ensure consistency and to create a platform to address any employee concerns.

Cultural Animals

In any M&A we hear so much about culture. And that’s for a good reason. Cultural differences can hurt any integration, so understanding cultures and how they can work together or better still, evolve into more dynamic, embracing cultures, is really important. As McKinsey outlined in an article on addressing the unseen forces within M&A, leaders need to understand existing cultures, to then be able to set a new, cultural direction for an ambitious, combined business.

“Over the longer term, companies with aligned corporate cultures and strong organizational health deliver, on average, total shareholder returns three times those of companies whose cultures and organizational health are not closely linked. Given the magnitude of the benefit, cultural alignment should be central to any merger integration.”

Having been through M&As several times in my career as CEO, it is something that I still think is vastly underrated and often delegated to Corporate Comms as a given. Clearly communicating our intentions to employees is just a part of that process. Leveraging influential employees helps to champion change and help to assuage any fears. Being open and honest about goals and strategies empower employees and will help you identify key elements of each culture. We all have to ask the questions; what do we stand for now and what do we want to stand for tomorrow? What’s changed and is everyone on board? How do we want to work together and what will enable our new, joined-up business to thrive for years to come?

Culture is fluid, not a static thing that can be ticked off a ‘to do’ list. It impacts employees and customers alike. Engage with customers early, identify risks and opportunities for improvements and growth, and walk in other people’s shoes, both customer and employee, to underpin your decision making. From this foundation, you can build on the more practical elements of integration, such as the technology systems and the processes. From there on in, you can execute your product plans and business strategy. Of course, the unexpected can happen, but if your people are onboard, any business has a better chance of flourishing.