United Rentals’ Higher Ambition Approach to Acquisition Integration
How does a Higher Ambition organization approach acquisitions? With strategic clarity and disciplined execution, as well as empathy, humility, and a willingness to learn. These were the themes that bubbled to the top during our conversations at a recent Learning Visit at the United Rentals headquarters in Stamford CT. While the integration approach itself can vary with a company’s value creation rationale, there was broad agreement among the attending leaders around the value of these five imperatives:
Strategic clarity around WHY they are undertaking an acquisition
Disciplined execution with a focus on speed
Empathy in the way they work and communicate with the people in both the acquired and the acquiring organizations
Humility in understanding that they don’t always have all the answers, and
A willingness to learn from experience about what went well through the integration process, and what could potentially be improved.
The focus of the Learning Visit was our host, United Rentals, the world’s largest equipment rental provider. Acquisitions have been core to who they are and how they’ve grown as a company. Founded in 1997, they became the largest rental equipment company in North America through the acquisition of US Rentals the very next year. Since then, they’ve grown to a $9bn company with 19,000+ employees and over 1,000 branch locations. CEO Michael Kneeland and the United Rentals team shared their perspectives and learnings from 20+ years of acquisition experience and opened the floor to attendees from IDEX Corporation, AmerisourceBergen, Pumpman, Henry Schein, Becton Dickinson, and Pariveda Solutions to ask questions and share perspectives. Don Devine (CEO of PumpMan), Steve Sichak (former EVP Integrated Supply Chain of Becton Dickinson), and Eric Ashelman, (COO IDEX Corporation) closed the day with a panel discussion of key themes.
ACQUISITION MODELS VARY DEPENDING ON THE ACQUIRER’S VALUE-ADD
“Are we a better owner?” The United Rentals leadership team introduced this as the bar they use when evaluating potential targets, and it sets up the idea of clarity around the acquirer’s value-add: If we are a better owner, WHY? Based on the experiences in the room, there’s no single right answer to this question. Several attendees illustrated a spectrum of possibilities. On one end, United Rentals adds value to acquired companies through a fully-integrated value proposition, including branding, systems, employee networks, and customer integration. On the other end of the spectrum, IDEX Corporation adds value by ensuring the acquired company has a strong leadership team and management processes in place and then empowering the businesses to operate relatively independently with a focus on the critical few opportunities that create the greatest value. Becton Dickinson and Henry Schein sit somewhere in between on this spectrum, both creating value for customers by enabling acquired companies to leverage their broad product portfolios into integrated solutions.
Unsurprisingly, each company’s approach to integration differs depending on where they sit on this value-creation spectrum. United Rentals delivers both cost synergies and revenue upside through a fully-integrated value proposition. When they make an acquisition, they strive to fully integrate the new team within 9 days — from sending welcome letters and employment agreements, to providing new laptops, to changing out uniforms. Michael Kneeland, United Rentals CEO, explained that this rapid integration is only possible because of the meticulous planning that begins months before the acquisition closes. The company as a whole, and the leadership team, in particular, has learned how to evaluate opportunities and integrate them successfully over the course of 20+ years of M&A activity. The first step is identifying a compelling and compatible target. They do this by applying a consistent framework that looks for multiple dimensions of “fit” (Strategic, Financial, and Cultural). Throughout the diligence process and through closing and integration, the team works systematically through their integration playbook, with a consistent dual focus on execution and humility. Dale Asplund, EVP of Business Services & CIO explained the importance of communication and speed, “It’s critical to get the teams working and talking together. We want everyone working together on the common goal of how quickly we can integrate.”
UNITED RENTALS ACQUISITION FRAMEWORK
The IDEX Corporation has a very different acquisition value-creation model. CHRO Jeff Bucklew and COO Eric Ashelman explained their distinctive and powerful approach.
They are a $2+ bn organization that effectively operates 40+ individual businesses. They operate in a highly technical and specialized industry, where expertise in the businesses is a key differentiator. They target companies that are market-leaders in a small niche, and they are clear about the value they add through back-end capabilities and getting the right leadership team in place. “If there’s only one thing we do around integration, it’s around getting the right leader in place for the business — get the corner office right and the top team right, and the business and culture will follow,” explained Bucklew. While they certainly are rigorous about instituting the financial systems and controls required for a public company, they are also careful not to overly constrain the acquired companies’ freedom of action. Rather their focus is on optimizing the distinctive value of each of their acquired companies and helping the management team focus on the “80/20” — the few business opportunities that matter most.
THE VALUE OF PEOPLE AND PLAYBOOKS
Kneeland explained that at its core, United Rentals is a service-delivery business, making their people their greatest asset. CHRO Craig Pintoff elaborated: “Our business is all about the people. We rent equipment to our customers. The cost of the equipment is relatively small to our customers, but the cost of time is huge. When the equipment is down, their costs can be huge. We guarantee a tech on the job site within 4 hours. There’s huge pressure on that tech going onto that job site. People are a huge differentiator for us.”
The emphasis on people is constant in their integration approach. Paul McDonnell, EVP Sales, and Specialty Operations, explained the importance of having empathy for the seller. “We spend a lot of time and energy bringing the acquired company’s leaders into the conversation. We listen, and we talk often… we have lots of discussions… and they feel respected.”
Pintoff shared some practical advice and tactics for bringing people from acquired companies into the United Rentals team and making them feel comfortable and excited about their new owners. For United Rentals, trust is key, and it’s realized through honest, transparent communication:
Host the full operations leadership team from the target organization at UR headquarters before the close to talk about opportunities, and to equip them to go back and communicate to their own organizations. “One of the worst feelings is for the management and operations teams to go back and NOT have answers for their team. This would make them feel apathetic, and often angry… we want to help them have the information they need to be able to feel confident talking to their teams,” McDonnell explained.
Send a welcome letter to all employees on Day One sharing United Rentals’ values and some Day One FAQs to help people feel calmer and more confident
Share the integration website with all new employees on day one, including stories and videos of current United Rentals employees who have gone through the integration process: unitedrentals.com/welcome
Leverage the Workforce App by Facebook to create conversation and community through real-time story sharing amongst employees.
Invite new employees to participate in United Rentals’ United Compassion Fund (an employee-funded 501(c)(3) founded to make funds available to employees and their families in need) right away — even before the closing — through contribution or through distribution.
The theme of empowering people and creating connections across employees was clear through United Rentals’ systems integration approaches as well. Dale Asplund, EVP of Business Services and Chief Information Officer, shared their approach to training new employees on United Rentals’ Systems. “Every new branch will get an employee from the existing company — a “superuser” of our systems” — to engage the employees and help them learn the new systems,” explained Asplund. “It’s the best way for new employees to learn, and a way to help people work together and develop local relationships.”
After United Rentals shared their experience, the floor was opened to discussion amongst other executives. Some remarkable similarities were apparent in approach, despite different value-creation models and integration strategies. For example, Bucklew of IDEX Corporation highlighted four practices their organization leverages during the integration process:
Narrow priorities with an 80/20 philosophy.
Widespread use of their acquisition integration playbook. “We all use it,” said Bucklew. “And we augment it with weekly reviews by the department.”
Look for quick wins with a “do no harm” philosophy. “We try to put ourselves in the employee’s shoes,” explained Bucklew. “We try to do the right thing — some decisions don’t make the BEST financial sense, but they are the right thing.”
Share information following detailed, thoughtful communication plans.
Everyone agreed on the importance of a well-structured deal, and of delivering on synergy targets. The concept of a playbook was common across companies, as was a “maniacal discipline around execution,” as Sichak put it. In some ways, the group felt this financial discipline and focus on execution represents the minimum bid for any company making acquisitions. The differentiator for Higher Ambition companies, and especially the ones in the room together in Connecticut, is the dual focus on both effectiveness and empathy… the recognition and respect for the humanity amongst the employees being integrated and those already part of the team. As one of the attendees put it, “You’ve got to deliver the targets. But how you do it matters. It’s about transparency, and about setting a tone — having genuine conversations that show an appreciation for the value and expertise of the people.”
We are extremely appreciative of all that we learned from United Rentals, and for their gracious hosting. The attendees were grateful for the opportunity to share thoughts and ask questions among peers. We hope those who were able to attend learned something new and had the opportunity to make connections for future learning and sharing. [If you were unable to attend, or if you have additional questions or further insights after the session, feel free to share them with us (eanthony@higherambition.org) — we’d love to connect you with someone in the community with relevant experience.]
ADDITIONAL RESOURCES
One Reason Mergers Fail: The Two Cultures Aren’t Compatible (Gelfand, Gordon, Li, Choi, Prokopowicz; HBR; October 2018) Highlights the challenges of integrating “tight” and “loose” cultures through the lens of Amazon’s 20187 acquisition of Whole Foods.
How to Make your Post-Merger Reorg a Success (Heidari-Robinson, Heywood, Pless; HBR; June 2018) Overview of the results of a study of 2,500 reorgs that compared the experience of M&A-driven reorgs to other types of reorgs to identify fact-based advice for executives. The authors find that only 11% of M&A-driven reorganizations are successful, with 28% actually having a negative impact. The most important factor driving M&A reorg success was having a detailed plan with specific change activities and milestones. Surprisingly less than half of those surveyed actually have these plans.
How to Help the Employees you Gain in a Merger Succeed (Schrage; HBR; May 2018) Provides a number of key insights on how best to retain and motivate high-level talent within an acquired company. Particularly focuses on the idea of “acqui-hiring”, often described as acquisition with the primary purpose of acquiring distinctive talent and capabilities (e.g., Walmart’s 2016 acquisition of Jet.com). The author explains that these types of acquisitions are about more than talent — they‘re about producing business impact and require clarity and mutual understanding about the specific strategic objectives for the acquisition on both sides.
Making the Deal Real: How GE Capital Integrates Acquisitions (Ashkenas, DeMonaco, Francis; HBR, Jan-Feb 1998) A classic article on acquisition integration, based on lessons learned from GE Capital highlights a number of fundamental and timeless principles around the effective management of people and process for acquisition success.