Perseverance, personal relationships, a programmatic approach and a disciplined process are critical factors in successful acquisition integration.
Since Choice Hotels’ acquisition of Radisson Hotels Americas last year, the biggest transaction in our company’s 80-plus-year history, I’ve been hitting the road to connect with Radisson hotel owners, the newest members of the Choice franchisee family, as well as legacy Choice hotel owners. As I spoke with them about the value the deal will deliver to their properties and the transformational growth it will bring to our company, many of them shared their hopes for evolving their business to reach new heights.
It struck me that the lessons I’ve learned from my experiences leading our integration of Radisson Hotels Americas now and WoodSpring Suites in 2018 could apply to hotel businesses at any level that are looking to expand. This could mean entering a new market or segment to diversify their portfolio or making an acquisition. There are a multitude of ways to achieve transformational growth.
Whether you are a global lodging franchisor or a single-asset owner, these tips can help keep your expansion on track:
1. Discipline is key. When you acquire an asset, you’re buying a bridge to something bigger. Make sure it isn’t a bridge to nowhere by taking a deliberate and thoughtful approach to the acquisition and the integration.
• Ensure alignment with your business strategy.
• Understand all integration costs and financial levers.
• Drive incremental value for all stakeholders.
2. Identify the deal value drivers, assign resources, operationalize your thesis and communicate your vision.
• Translate your financial plan, synergies and value assumptions into operational plans that your teams can understand and execute.
• Ensure you have appropriate resources allocated to the execution of your strategy and that the leaders in charge of the integration can positively influence expected outcomes without interfering with day-to-day operations.
• Make sure your internal and external stakeholders understand your vision.
3. Execute on the “Three S’s.” When making a big acquisition, you’ll need to build “integration playbooks” and over-index on the items you identify as critical for deal success. At Choice, we developed a framework for integration that we like to call the “Three S’s”:
• Stabilize. Focus on maintaining continuity and strong brand equity and performance in the acquired business, as well as a solid value proposition for your stakeholders.
• Synergize. In a successful acquisition, the value of the combined companies is greater than the sum of the individual companies. Focus on harmonizing costs and operations, delivering revenue opportunities that leverage the new scale, enhancing the value proposition, and making smart, long-term investments.
• Strategic growth. In most cases, you will have acquired assets, new capabilities and/or “know-how” in order to drive growth. Make sure you protect the “secret sauce” and/or the capabilities you originally targeted and position them as growth vectors for the combined entity.
4. Do not underestimate the importance of change management and the need for new operational models.
• After an acquisition, it is critical to understand what changes need to be made to your processes and your organizational and decision-making structure in order to achieve the anticipated benefits.
• Keep your stakeholders involved and informed. While you will be living and breathing the integration, your customers will be experiencing uncertainty and expecting to see you deliver on your pre-acquisition promises.
I like to think of integrations as a round of golf. You may be familiar with the golf course and know where you want to hit the ball, but every round is different since it depends on the current characteristics of the terrain, the weather and the other players—all factors beyond your control. However, at the end of the day, you can control your process and your approach, and if you stay true to them, you can succeed.
Another key to success, in golf and in business deals, is perseverance. Our President and CEO, Pat Pacious, often quotes the famous saying, “Perseverance is not a long race; it is many short races one after the other,” and it is certainly true. You will face many short races—some of them unforeseen—before, during and after closing a deal, and you must keep going while staying true to your vision.
One of the things I love about golf is that whether you’re playing with an old friend or someone you’ve just met, the game helps you build your relationship with them. Developing strong personal relationships is also crucial to closing a deal.
When you acquire an asset, you’re buying a bridge to something bigger.
Raul Ramirez Sanchez
Choice has long led the industry with our voluntary franchisee retention rate, and the relationships we built over time with our owners were absolutely critical to the acquisition. Our existing franchisees understood and believed in the value proposition Choice offered and thus became powerful advocates for the deal with our potential new franchisees, the Radisson owners. If we hadn’t built and maintained those enduring relationships with our franchise owners, the integration would have been much more complicated.
So, I can tell you this: Whether it’s a multi-million-dollar company or a single hotel franchise that’s being acquired, perseverance, strong personal relationships, a programmatic approach and a disciplined process are key to success.