Why Acquired Entrepreneurs Rarely Last Long in Corporations
Ever wonder why many acquired entrepreneurs either leave or get fired after only a few months following their acquisition? This is a major problem for corporation who undoubtedly are investing not just in the company they acquired, but in the know-how, market intimacy and business expertise of the leadership team that launched and grew the business. In my experience, the inability to retain successful entrepreneurs is one of the major reasons why the success rate of acquisitions still remains below 30%.
Having seen nearly 20 such individuals over my career disappear from our corporate landscape and after speaking to many others who have experienced the same fate, I have arrived at these 4 main reasons why this happens.
1. The acquiring corporation makes promises they cannot keep. This scenario repeats itself over and over again. After all the financial and legal terms are agreed to, the entrepreneurs is still hesitant to sign the purchase agreement because he/she is struggling with the idea of working for someone else. In an effort to bring the deal to closure, the acquiring company promises the entrepreneurs that they will have full control over their business and that not much will change when inside the bigger corporation. In fact, they will be told that more resources and an immediate access to a broader network will help our entrepreneurs accelerate their vision. Unfortunately, the reality is much different when the entrepreneur enters the corporate world of existing corporate governance, standardized business practices, and P&Ls, and of experienced corporate executives who know hot to compete for the lion's share of budgets, management attention and limited resources.
2. The acquired entrepreneur makes assumptions that are unrealistic. On the flip side of the first point is entrepreneurs blindly entering the corporate world thinking that it can only mean that bigger must be better. They assume that the company that acquired them can only have the best intentions and will make them the priority within the rest of the organization. The reality is quite different. The larger the corporation, the more competitive the environment for access to budgets, resources, people, senior leadership attention, funding, and overall priorities. The entrepreneur that is not politically savvy or who lack experience competing with peers for access to support will quickly struggle and become disillusioned.
3. The corporation has not properly prepared for the arrival of entrepreneurs. For the most part, acquisitions must be kept very confidential. For this reason, only a handful of individuals in the acquiring company are involved in negotiations and due diligence work and know that a new business is about to be added to the organization. This combined with ill-prepared integration plans result in new colleagues not sharing a common understanding of the reasons behind the acquisition, the benefits to be gained, the support they are expected to provide, and the sacrifices they might be expected to make. This can quickly lead to confusion, unhealthy competition, and poor support for the acquired company and its entrepreneurial team.
4. The corporate leaders and the acquired entrepreneurs confuse entrepreneurship with intrapreneurship. It is such a common mistake to hear corporate leaders speak of entrepreneurship instead of intrapreneurship. In the book, Winning at Intrapreneurship, I refer to intrapreneurship as "organizing and executing the activities that are necessary to monetize an innovation and turn it into a profitable and sustainable business within a corporate environment." The challenges associated with this are quite different than those that are faced by an entrepreneur launching a startup on his/her own. Unfortunately, business leaders will acquire businesses and fail to realize that the successful entrepreneurs will have to transition to intrapreneurship and face the many challenges that are unique to successfully growing a new business or line of of business within an existing company.
