The fact that several assessment providers have recently been bought tells us two things: firstly, these companies have a value that goes beyond their assessment portfolio. And, secondly, it is very difficult for a European-based or a US-based assessment provider to become a truly global player without additional help.
A key reason why a good assessment provider is an attractive business to acquire is that there has been a growing recognition worldwide of the value that psychometric assessments provide when employers are recruiting and developing their staff. The additional insights about candidates, gained from assessments, help organisations to select the right people for their roles. The success of psychometric testing has further fuelled the demand for high quality assessments and, in turn, this has led to new and exciting innovations in the industry, such as the creation of realistic job previews, situational judgement questionnaires, mobile testing and gamification. These developments have broadened the business scope of assessment providers - and enhanced their profitability.
But what really makes an assessment provider an appealing acquisition target is the data they can provide about the personality, abilities, values and motives of employees. When you combine this information (which is gained via assessments) with measurements of employee performance and engagement (gained from performance reviews and engagement surveys), you gain a very clear understanding of exactly what it takes to be successful in your organisation. This is the basis of strategic talent analytics and the resultant insights can transform the way you attract, recruit, develop and retain your staff. Because assessment data plays such a crucial role in this, assessment providers have become a valuable commodity.
At cut-e, we had expanded across Europe, the Middle East and the Asia Pacific region, funding this growth from our own cash flow. However, we had limited success when attempting to penetrate important markets such as the United States and China. We knew that to reach the next stage in our development, where we could support large-scale global assessment projects, we needed a truly global presence.
Rather than succumbing to the various approaches we received from investment companies and venture capital firms, we chose to partner with a complementary organisation. After meeting with several potential suitors, we decided that Aon was the perfect match. So, here are five lessons for a successful acquisition that stem from our experience:
1. Choose the right partner. In a hostile takeover, you clearly have no control over who acquires you. But when you have a choice, it’s vital to choose an organisation which thoroughly understands your business and which has similar values and a like-minded philosophy. This is the number one reason why so many acquisitions fail. Too often, an acquirer will buy a profitable business and then start to impose changes because they don’t fully understand what has made that business successful in the first place. When choosing to work with Aon, we were very clear that we wanted to join an organisation that shared the same long-term vision for our business and whom we could partner with effectively in the future. They have their own assessment business, so they understand the issues and challenges we face in terms of product development, implementation, integrations and customisation. Their business had a great synergy with ours. Their strengths balanced our weaknesses and vice versa.
2. Retain your management team. Where possible, you should aim to keep the senior team members who have built and developed your business, so they can oversee the integration and ensure that the business continues to prosper under new ownership. The four members of cut-e’s senior management team - myself, Achim Preuss, David Barrett and Espen Skorstad - will all continue in our roles at cut-e and we’ll also join the leadership team in Aon Hewitt’s Talent, Reward and Performance practice.
3. Reassure your employees. Employees will be understandably nervous when an acquisition is announced. Change leads to uncertainty, so it is important to communicate what is happening, why it is happening and what it means for your employees, as soon as you make your announcement. Plan your communication strategy in detail in advance. Be realistic, honest and empathic about any changes that do need to occur. Being part of a larger group should create new career opportunities for individual members of staff and open up new possibilities for international assignments or secondments. Remember, anything you can say that will calm employee nerves, restore confidence and excite them about the future will be welcomed. But don’t make promises or give guarantees that you can’t keep.
4. Communicate the benefits to your clients. The same applies with other audiences, such as your clients, affiliates and the media. Like your employees, they’ll all be very interested to know whether your name, brand, values and culture will change following the acquisition. Emphasise the benefits and any service enhancements that the acquisition will bring. If appropriate, confirm that you’ll preserve what is good about your organisation. In cut-e’s case, we were able to reassure our clients that our business, our operational structure and our tradition of innovation would continue as before. Plus, we were able to explain that the acquisition would enable us to combine our expertise with Aon’s to develop new and exciting assessment products and next-generation talent analytics for the global market - because Aon has access to essential employee data on performance, engagement, succession planning, retention and absenteeism, through the services it provides.
5. Manage the ‘meetings’. Inevitably, many of your employees will need to work closely with colleagues from the acquiring company, so it is important to arrange meetings and social interaction events for the relevant teams in the early aftermath of the acquisition. We scheduled ‘meet and greet roadshows’ in which senior members of Aon’s team visited our offices to introduce themselves and discuss how we could all work together. After that, there’s an ongoing need to share success stories and communicate the benefits of working together to employees, clients, the market and the media.
Acquisitions are occurring in every area of HR, not just in assessment. Hopefully, our experience will help any other business that is contemplating this form of expansion, to gain full value from the transition.
Andreas Lohff is co-founder and chief executive officer of international talent measurement and assessment specialist cut-e.