What makes acquisition and integration successful

By Philippe Delpech, Sonepar President & CEO

Many companies fear making acquisitions. Brand dilution, overpaying, and failure to integrate are all legitimate concerns. Experience is essential and, corporately, Sonepar has plenty.

Between 2021 and 2024, we completed 21 acquisitions in North America, driven by a focused and talented local team, and supported by my deep experience in the North American market and in executing acquisitions. With a career spanning many sectors, I have seen my share of acquisitions - some brilliantly executed, others bound for failure.

So how do you get it right? Success hinges on five pillars: market intelligence, strategic fit, negotiation, integration, and understanding of the culture. These must fuse into a well-designed process, and I believe Sonepar is world class in this respect.

Gathering market intelligence

Once, the horizon stretched only as far as personal contacts. You might know someone looking to sell, you got together and there might be a deal. Today, Sonepar's size and reputation mean that all types of acquisition intermediaries are in constant contact with us. Whatever your size, you can take steps to broaden your intelligence: build relationships with bankers, brokers, and professional services firms; draw on the wealth of online intelligence; and invest in executive-level networking. Relationships are important, but intelligence is key.

Associates want to know: What does this mean for me? Will my job change? Can I trust this new leadership?

Strategic fit

Traditional approaches focus on financial multipliers. The problem is that a company selling at 5x earnings looks like a bargain, compared with a competitor selling at 10x. But the cheaper company is not always a good deal. At Sonepar, we use detailed analytics on two key aspects. First, synergies. Here, a word of caution about buying companies to compensate for your weaknesses. Management theory encourages it, but my experience is that compensating for a weak area leads to weak integration. I use less analytical methods too. One is, "Can the acquisition rationale be explained in a sentence?" If the story is too complex, it often rings an alarm bell. Second, are the synergies logical and executable by the team, which demonstrates that expensive companies can be a good deal, and vice versa.

Negotiating skillfully

Then negotiations begin. This is not a zero-sum game - soft skills are important. Your lead must capture the delicate balance between winning hearts, being transparent, and protecting returns. Too little honesty and your counterpart does not have the full picture; too much of either and you risk being seen as a schmoozer or an ogre.

My experience here is that an hour with the CEO is worth a dozen annual reports.

The role of local leadership in integration

One of the most overlooked aspects of a successful acquisition is the role of local leadership. In our model, the country manager is not just a participant in the process, they are key. Why? Because acquisitions are not abstract. They happen in real places, with real people. The country manager understands the local market, the cultural nuances, and the operational realities. They are best positioned to assess whether the acquisition will work on the ground. We have seen time and again that when the country manager leads negotiation and integration, the chances of successful integration increase. They bring credibility, context, and continuity. Acquisitions are emotional too. Companies who join us often reflect years of hard work, identity, and pride. That is why relationships matter. Associates want to know: What does this mean for me? Will my job change? Can I trust this new leadership?

Communication is key. Top management must be visible, accessible, and honest. We apply a proven, almost militaristic, process in the first week. On the day of acquisition, we hold a "town hall" meeting where details and benefits of the change are presented, face to face with associates. This involves both Sonepar's senior executives - some traveling long distances - and, importantly, the acquired company's top management.

Culture matters

My experience here is that an hour with the CEO is worth a dozen annual reports. A frank conversation reveals priorities, how the company is led, its ethics, and so on. This provides immediate benchmarks to compare with our culture. You should also be prepared to leverage acquired culture as well as changing it. We might acquire a company that is especially good with small customers or strong in lighting. We need to take the time to understand these strengths at the start, then nurture and grow them. You can't always get acquisitions exactly right but with careful planning, and a focus on the right areas, you can maximize your chances of success.

Being successful in acquisitions requires talent and discipline.