The biggest shift in M&A: Strategic and cultural fit first (then financial)

Anyone who's been watching Fortra over the past few years knows that we've gone through an intense period of inorganic – or M&A driven – growth. Since 2020, we have completed 19 strategic acquisitions and become a leader in cybersecurity across Data Security and Brand Protection. M&A can be one of the best ways to accelerate an organisation forward, but it can also be a significant destroyer of value if it drives an organisation to lose focus or creates a culture clash. 

What we've learned through this journey, ironically, is that in order to execute M&A that ends up having a good financial return, you have to anchor your acquisition criteria in the non-monetary components of the deal:

First, the acquisition must align with your organisation's overall strategy. As leaders, we need to ask: does it help us do something better or faster than we can do it ourselves? 

Second, the organisation you are acquiring must be a cultural match. In a phrase, life's too short. You can get to cost synergies quickly, but it takes a lot longer to become "one company" and start to drive growth after a poor fit.

Of course, the financial story – purchase price, synergies, etc. – is important, but only if you have first answered the questions above. These principles have come out of trial and error, but they're the lessons that have risen to the top, both from my previous career in finance and in my role leading Fortra today.

Question 1: Strategy 

"Does this acquisition align with our organisational strategy?" This question is easy to ask, but difficult to answer. If your organisation has an unclear, overly general, or poorly articulated strategy, it is impossible. 

The more clearly you can articulate where you are going and who you are trying to be as an organisation, the easier it will be to try to evaluate things practically against that vision. 

As leaders, we should be constantly simplifying and refining our vision of where we are going in the market and, from an M&A perspective, should simplify our strategic evaluation to some version of the following: Would buying this company help us achieve that faster or better than if we did it ourselves? If the answer is yes, we need to dig in; if the answer is no, we move on.

Another way to look at this question: if you are unclear about where you are going or what you are trying to create, acquisitions can do nothing but distract you.

Question 2: Culture

Companies and corporations are just groups of people who choose to work together to achieve a common purpose. It can be easy to think of the large corporation as its own entity with its own inertia, but at its core it is just a group of people. People have tremendous capacity for achievement and creativity, and an organisation that creates the right environment for innovation, ownership, and achievement can harness that to immeasurable benefit.

That "environment" is what people and innumerable business cliches refer to as "culture." It is notoriously difficult to change - think years, not months - in order to make an impact. Except through M&A. Putting the people of two organisations together by definition creates something new on the other side. It can be a net benefit if there is strong cultural alignment, but it can also be toxic if not, and in that case – it takes years to adjust. No amount of near-term cost synergies can offset the impact of a full-scale culture clash.

As a result, we should ask: "Is there a strong cultural fit and alignment of values between our organization and the acquisition target?" If yes, we dig in and if the answer is "no," we move on.

Lessons Learnt

I have learned a lot about M&A through trial and error. Over time, I've seen how organisations that grow through acquisition become shaped by the people and capabilities they bring in. In many cases, a significant portion of the workforce joins through acquired businesses, and the long-term strength of the organisation depends on how well those teams are integrated and empowered.

One example that reinforced this lesson was the acquisition of a publicly traded company in the secure managed file transfer space. While the financials made sense, what ultimately determined the deal's success was strategic alignment and cultural compatibility. The acquired team became deeply integrated into the broader organisation, contributing beyond their original scope. Years later, the sustained performance of that business validated what the numbers alone could not predict at the outset.

As I reflect on repeated acquisitions and the evolution of our approach, I find myself circling back to an adage that captures the lesson more clearly than anything else:

Price is important, but there is not a price low enough to make up for a strategic or cultural misstep.

Advice, and Surprises

When I look at leaders evaluating their first acquisition, my impulse is to remind them to keep strategy top of mind. Know why it is you are buying this business – if it answers questions 1 and 2, then be aggressive and get it done!