'It is essential to have a clearly defined goal behind every buy'

MUMBAI: Be Watchful when you make acquisitions, that were the message sent out by CA, Inc’s president and CEO John Swainson when he delivered his keynote address at the ET Think Turf conference in Mumbai. Speaking to an assembly of CEOs and decision makers, he said that integration held the key to determine the success of any acquisition that any company makes.

Citing CA’s own experience, he said that there was a lack of cohesion as the acquisitions that CA made were loosely integrated. A general view was taken to buy companies in financial trouble, and CA needed wholesale reorganisation to bring together 70-odd acquisitions made by the company when Swainson joined the company.

“Acquisitions are a key part of any company’s growth but at the same time it is essential to have a clearly defined goal behind every buy and also an accurate due diligence is a must to eliminate the case for duplication of assets within the acquiring company,” he said addressing a 100-people strong audience. Adding further he said his experience over more than 40 acquisitions showed him that the integration of the information technology infrastructure is critical to bring together the two operations successfully. “You can’t have two different ways of looking at the same data.”

Full disclosures played a crucial part in taking buyouts on the route to success. “If there is a lack of honesty, then it is big problem when it comes to integrating the acquired company,” he said in his keynote address. Mr Swainson emphasised on integration. For instance, he said, the companies, and therefore the software products and solutions that CA acquired, were often determined by financial rather than a strategic criteria. “As a result, nothing got integrated. Instead, CA was simply buying revenue and market share.”

Referring to his experience of nearly 40-odd M&As in his career that also included a long stint at IBM, Swainson said that a clearly defined acquisition strategy was the key to inorganic growth. In addition to this, Mr Swainson also insisted on doing a thorough homework about the target company. “Thoughtful planning and due diligence are critical in ensuring that you are getting what you pay for,” he said.

In conclusion, he said that each acquisition was unique in its own way, and making up the intent to buy a company is very easy but “unlocking the real value of an acquisition is where the hard work really comes in”. Having said this, he further added that going for an M&A was not the only way a company can grow. “There is no question that acquisitions are a sound part of nearly every growth strategy. Sometimes the cost of entering a new market, or developing a new technology or product is simply far greater than simply acquiring those assets,” Mr Swainson said.