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deals in the water industry, from the U.S. Filter era, right up to the present. Thegeneral idea here is that by combining organizations, one cannot only reducecompetition, but also accomplish cost-cutting and improve productivity viagreater economies of scale.• A quick and inexpensive way of growing the business: a lot of deals aresimply ways of growing the revenues and market share of the acquirer morequickly. When you cut through all the rhetoric and PR, there may not really beany big strategic premise. A lot of deals occur simply because interest rates arelower and credit is cheap, because the target company has a lot of cash to helppay for the deal, because currency exchange rates are favorable, or because thetarget company’s stock price took a short-term dip.• The ability to improve a target company’s performance: this approach isdriven by the acquirer’s belief that it can grow the revenues, reduce the costs,and generally improve the performance of the target company. Many times alarger company may be able to help a smaller or start-up business in terms oftechnological expertise and know-how, research and development budgets, orenhanced marketing and distribution channels.Clearly, every acquisition is different, and there may not be any iron-cladrules for ensuring the success, but there are a lot of important guidelines. Thosecompanies that have been successful in evaluating, implementing and thenintegrating acquisitions typically adhere closely to a number of general rules orcriteria, such as the following:• A detailed plan and timetable for integration of the new company — thismay not be the exciting part of the process, but it’s the part that’s likely todetermine success or failure. It should include the establishment of teams,schedules and specific responsibilities to make sure that the projected synergiesare actually accomplished. Sometimes this can include detailed post-dealinterviews with various parties, on-line “deal rooms” and regular review meetings— activities which may go on for years. Many successful acquirers will tellyou that the real work of an acquisition begins the day after the closing. Lotsof deal-hungry companies, however, forget this critical fact and go straight onto the next deal.• Careful and thorough communication plans — one of the biggest risksin any acquisition is that key people get disillusioned and leave, not only inthe acquiree, but sometimes also in the acquirer. People don’t like uncertainty;it’s better to tell people the news — even if it’s bad — than to keepthem in the dark.• Systematic attempts to learn from past acquisition successes and failures.“Serial” acquirers have a formal process and review effort to make sure that theylearn from their mistakes, as well as their successes.• Attention to cultural and human resource issues — transactions are not donebetween faceless bureaucracies — companies comprise living and breathinghuman beings and if the people aren’t happy, or if the two teams aren’t a goodcultural or personality fit, then the deal is probably not going to work very well.This is obviously only a very brief overview of what is an extremely complex anddetailed process — a process that often takes years to fully implement. Every dealis a little bit different and a strict cookie-cutter approach doesn’t work. But, at thesame time, there must be a rigid set of guidelines that are followed — success israrely achieved by simply throwing two companies together and hoping for thebest. And of course even the most careful and detailed planning and implementationwill not guarantee success if you overpaid to begin with.Steve Maxwell is Managing Director of TechKNOWLEDGEy Strategic Group (TSG), aBoulder, Colo.-based management consultancy specializing in merger and acquisitionadvisory services, and strategic planning for the commercial water and environmentalindustries. Maxwell is author of the annual Water Market Review, and is alsothe editor of a recent book entitled “The Business of Water.” He has advised dozensof water firms on strategy and transactional issues, and can be reached at (303) 442-4800 or maxwell@tech-strategy.com.[EDITOR’S NOTE: This regular column tracks and evaluates the performance andfuture potential of 20 key publicly traded water companies. In each issue, Maxwellpresents key investment data, and summarize major investment opportunities andstrategic trends in the broader water industry.]November/December 2010Water Utility Infrastructure Management 21