Elizabeth Gerbel, CEO and founder of Houston-based E.A.G. Services Inc., shares how to navigate M&A activity for both startups and large companies. Pexels

Nervous about an upcoming merger or acquisition? You're not alone. Last year, there were nearly 15,000 mergers and acquisitions in the U.S., according to the Institute for Mergers, Acquisitions and Alliances. These transactions, although executed with optimistic intentions, don't always work out. What is it that separates those that deliver from those whose results simply fall flat?

While you won the legal battle, the real culprit to a failed merger or acquisition transaction lies in post-deal activities such as integrating the divesting company's assets into the acquiring company's existing systems, processes, and organizational structure. If executed poorly, companies could face several hurdles, including:

  • Increased acquisition costs
  • Loss in previously efficient business processes
  • Reduced data quality in current and acquired assets
  • Extended TSA timeline

With the stakes being high, it is critical for each step of a merger or acquisition to be rock solid before moving on to the next stage. In fact, when executed successfully, an M&A transaction can significantly benefit both companies — from startups to well-established corporations.

A strategy for M&A data integration

In order to facilitate efficient and effective merger or acquisition, the critical success factors focus on these driving goals: Minimizing organizational disruption and Maximizing ROI. To achieve these goals, we execute three main stages for every merger and acquisition.

  1. Planning
  2. Analysis
  3. Execution

We start with thorough planning, think of planning as the foundation for a successful merger or acquisition. Without a good plan, the company will be vulnerable to all sorts of structural weaknesses. To prevent key elements from falling through the cracks, companies must define objectives and data requirements, maintain strong communications, and develop both short-term and long-term expectations.

The next step – analysis – since data is absolutely essential in mergers and acquisitions. There is a lot to watch out for: What's the best way to extract and convert the acquired data? Will IT or business support need to be permanently added? What system configuration changes are required? What are the impacts to current business processes and internal audit controls? Will additional training be required? The answers to these questions are highly individualized to each merger and acquisition, and they'll impact how seamless the transition will be. Many people gloss over this stage but then realize the criticality not only in the case of a merger or acquisition but also in the case of a future divestiture.

Finally, the last stage: Execution. This stage is one of the main reasons why some mergers and acquisitions may fall short of expectations. To avoid common issues stemming from poor execution – including disruption of previously effective business processes, impaired customer service, and increase in the cost of the merger or acquisition – we coordinate roles and responsibilities, ensuring that all key tasks are executed. From day one to full integration, we continually monitor to ensure the company is on track to meet its initially defined objectives.

The risks and benefits of a merger or acquisition

I'll be candid: Without a solid foundation through adequate preparation, a merger or acquisition is set up to fail. This risk can be higher for startups and small companies, which don't have the resource buffer that some larger firms can fall back on. Large companies may face a different risk, business processes and data may not be aligned with their current state. And yet, according to Economy Watch, an extensively strategized merger or acquisition transaction, beyond increasing the company's size, can yield significant benefits that include:

  • Improving its strategic position
  • Entering a new market
  • Developing new assets
  • Lowering operational costs
  • Expanding market influence

For smooth mergers and acquisitions, we recommend a multi-step process so that you can identify and reduce risks, condense your integration timeline, and quickly capture value. Because despite the challenges, not all is lost during a merger or acquisition – and there is much to be gained.

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Elizabeth Gerbel is the CEO and founder of Houston-based E.A.G. Services Inc.

International beauty giant Shiseido Company Ltd. has acquired Houston-founded Drunk Elephant. Photo via Business Wire

Houstonian's skincare line acquired for $845 million

A beautiful acquisition

A skincare line with ties to Houston is joining the ranks of other popular beauty brands this week. International beauty giant Shiseido Company Ltd. has announced that it is acquiring Drunk Elephant in a reported $845 million deal.

Houstonian Tiffany Masterson, chief creative officer, founded the company in Houston in 2012. The quality of products and playful branding attracted a broad range of demographics as the company experienced exponential growth.

"I started this business as an industry outsider, and from the beginning I did things a little differently," Masterson says in a news release. "To join with a powerhouse beauty company such as Shiseido that leads the industry in innovation and global excellence is a dream come true for me and for Drunk Elephant. We share similar values, most importantly an unwavering commitment to the consumer. I chose a partner who will let the brand continue to be itself, with the same formulations and the same team."

According to the release, the acquisition will allow Drunk Elephant's products to expand more throughout America, and enter new markets in Asian and Europe. The new subsidiary will also have support from Shiseido's Global Innovation Center and Digital Center of Excellence.

"This transaction is squarely aligned with Shiseido's VISION 2020 goal of accelerating growth and creating value through strategic partnerships," says Masahiko Uotani, president and CEO of Shiseido, in a news release. "I am very pleased to welcome Tiffany and the Drunk Elephant team to the Shiseido Family and together, pursue our long-term mission of 'Beauty innovations for a better world.'"

Masterson will maintain her role as chief creative officer and add the title of president for the company. She will report to Marc Rey, CEO of Shiseido Americas and chief growth officer of Shiseido.

"Drunk Elephant is built on a strong brand foundation and a unique philosophy that fits perfectly with Shiseido's values and skincare heritage," Rey says in the release. "Our innovative and people-first cultures are well aligned, and we share an unwavering commitment to our consumers. I also believe the brand will contribute to the business performance of Shiseido Americas."

The beauty industry is having a bit of a moment right now as consumers — who have shelves and shelves of products to choose from — are drawn to specific products.

"While reasons for acquisitions in the beauty space vary, we are seeing that some of the big players are seeking to balance their portfolios by creating products and services that consumers find relevant," says Laura Gurski, Accenture's global lead for consumer goods and services, in a statement.

"It is crucial that brands completely reinvent the beauty experience, making it much more than a transactional event," she continues. "This is what startups and disruptors do best. They create a collaboration with each consumer, allowing them to participate and experience products, services and brands in new ways."

According to Accenture Strategy's research on M&A in consumer goods, companies acquiring new capabilities represents 47 percent of activity and new technologies represents 35 percent of activity. These figures are on par with more traditional reasons for M&A, like new industries (43 percent) and new geographic markets (37 percent).

"For the first time, beauty companies have the opportunity to achieve real differentiation by taking their relationships with consumers to a completely new level," Gurski says.

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Houston scores lofty ranking in new study of America’s best cities

h-town proud

Buoyed by diversity, fine food, and Fortune 500 companies, Houston ranks as the 11th best city in the country and the top city in Texas, according to a consulting firm's annual study.

"Smart, skilled, and soulful, Houston is the American city of the future," says the study, published by Vancouver, Canada-based Resonance Consultancy Ltd., which specializes in marketing, strategy, and research for the real estate, tourism, and economic development sectors.

In last year's study, Houston also held the No. 11 ranking.

The 2020 study praises Houston for its:

  • Ethnic diversity, with more than 145 languages spoken in Houston-area homes.
  • Highly regarded restaurants, rated fourth behind Los Angeles, New York City, and Chicago.
  • Healthy concentration of Fortune 500 companies, representing the country's biggest businesses. Twenty-two companies based in the Houston area are listed on this year's Fortune 500.
  • Airport connectivity (No. 7 ranking).

The study further lauds the city for development of the Houston Spaceport, a hub for the region's space industry. However, the study notes that Houston ranks 47th for prosperity, 74th for employment, and 99th (next to last) for income equality.

"From medicine to space to energy, we are at the forefront of innovation. We are resilient problem-solvers who work together to find common solutions, no matter if we're facing Hurricane Harvey or a global pandemic," real estate developer David Mincberg, chairman of Houston First Corp., says in an August 6 release. "Houston continues to grow and get better, so we invite those who live here to rediscover our city and visitors to come as soon as it is safe and enjoy all that Houston has to offer."

Houston First promotes the city as a destination for leisure and business travelers.

Resonance Consultancy ranks large U.S. cities by relying on a mix of 26 performance and quality measures. This year, New York City tops the list, followed by Los Angeles; San Francisco; Chicago; Washington, D.C.; San Diego; Las Vegas; San Jose, California; Miami; and Boston.

Three spots behind Houston is Dallas, at No. 14. Austin comes in at No. 17 and San Antonio at No. 28. Fort Worth isn't included in the ranking.

Highlights for Dallas include:

  • No. 1 ranking for airport connectivity, thanks largely to the presence of Dallas/Fort Worth International Airport.
  • Country's highest concentration of corporate headquarters (more than 10,000).
  • Country's third largest grouping of Fortune 500 companies (24 in Dallas-Fort Worth).
  • Sixth largest LGBTQ community in the U.S.
  • Dallas Arts District, the country's largest contiguous urban arts district.

"Dallas inspires big ideas. This big and bold approach has resulted in world-class arts, culture, architecture, dining, business, and more, which are changing the face of the city," VisitDallas, the city's convention and tourism arm, says on its website.

Sitting at No. 17, Austin boasts No. 8 rankings for educational attainment and nightlife, the study says, along with a vibrant cultural scene anchored by events such as SXSW and a flourishing tech landscape dotted by the likes of Apple, Dell, Facebook, Google, and Oracle.

Austin's showing in the Resonance Consultancy study comes on the heels of the city being hailed by U.S. News & World Report as the No. 1 place to live in the country, with particularly high marks for desirability, jobs, and quality of life.

"With a strong, continually growing tech-talent labor force and an overall lower cost of living and doing business, I think Austin could end up being a beneficiary market in the recovery of the pandemic as many tech users look to move out of more densely populated areas like New York City or San Francisco," Erin Morales, senior vice president of commercial real estate services company CBRE, said in a July news release.

At No. 28, San Antonio earns kudos from Resonance Consultancy for its plethora of attractions, including the River Walk, five colonial missions, San Antonio Zoo, San Antonio Museum of Art, and Texas Golf Hall of Fame. Alamo City shows up at No. 7 in the study's attractions category.

In addition, the study highlights San Antonio's popular mixed-use Pearl district, whose assets include a campus of the Culinary Institute of America. "Around the esteemed school, a host of grads and chefs have clustered, creating a smorgasbord of choices from Italian to 'cue to bakery to vegetarian cuisine," according to the study.

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This article originally ran on CultureMap.

3 Houston innovators to know this week

who's who

Editor's note: All three of this week's Houston innovators to know started something new amid a global pandemic — a new job at a Texas-wide accelerator, a new app to help shops and businesses safely serve customers, and a new resilience-focused hub that launched just in time for hurricane season.

Richard Seline, managing director of ResilientH20

Richard Seline of ResilientH2O Partners explains how he's helping foster new hurricane and flood prevention technologies in the Bayou City. Photo courtesy of ResilientH20

Following Hurricane Harvey, Richard Seline saw several emerging startups focusing on flood tech. Meanwhile, he saw insurance companies very interested in finding new technologies in the same space. But, these two entities were not talking.

"It's two different languages," Seline says on the Houston Innovators Podcast. "There's a whole language and a whole mindset within the insurance industry that is not real well known."

Seline, managing director of ResilientH20, along with the Insurance Information Institute and The Cannon, has launched the Gulf Coast & Southwest Resilience Innovation Hub to foster this type of technology and bring insuratech startups and the big insurance players to the table. Stream the podcast and read more.

Adrianne Stone, venture associate for Capital Factory

Adrianne Stone has joined Capital Factory's Houston operations as the company prioritizes digital startup interaction. Photo courtesy of Capital Factory

After spending a year and a half in Silicon Valley on the products team for 23andme, Adrianne Stone is back in Houston, filling the venture associate role for Capital Factory. Stone got her Ph.D from Baylor College of Medicine and replaces Brittany Barreto, another BCM Ph.D who left the position to pursue a new venture.

"The mindset in Silicon Valley is different from how it is here in Texas — in good ways and bad ways. It was interesting to be exposed to a very potent startup vibe," Stone tells InnovationMap. "I'm looking forward to being able to meet all the cool companies, founders, and investors we have here in the Houston area." Read more.

Ethan Saadia, app developer and creator of Wayt

Ethan Saadia, a 17-year-old high school student, created an app to improve the user experience of shopping during a pandemic. Photo courtesy of Wayt

Like most of the world, Ethan Saadia has seen small, local businesses suffer from the social distancing mandates amid the COVID-19 outbreak. Saadia, a rising high school senior, wanted to do something to help.

He created Wayt, a smartphone app that provides businesses and their customers with a platform to communicate making curbside pickup, booking appointments, and even join a virtual line. Ultimately, Wayt has a great opportunity to help businesses — even outside of a pandemic

"From my perspective and experiences from my friends and family," says Saadia, "curbside pickup and virtual lines are definitely here to stay because even before the pandemic, popular places used to have long lines and that presented many new challenges. The pandemic is just accelerating technological change that will make our lives easier." Read more.

Ventilator designed by Rice University team gets FDA approval

in the bag

A ventilator that was designed by a team at Rice University has received Emergency Use Authorization from the U.S. Food and Drug Administration amid the COVID-19 pandemic.

The ApolloBVM was worked on March by students at Rice's Brown School of Engineering's Oshman Engineering Design Kitchen, or OEDK. The open-source plans were shared online so that those in need could have access to the life-saving technology. Since its upload, the ApolloBVM design has been downloaded by almost 3,000 registered participants in 115 countries.

"The COVID-19 pandemic pushed staff, students and clinical partners to complete a novel design for the ApolloBVM in the weeks following the initial local cases," says Maria Oden, a teaching professor of bioengineering at Rice and director of the OEDK, in the press release. "We are thrilled that the device has received FDA Emergency Use Authorization."

While development began in 2018 with a Houston emergency physician, Rohith Malya, Houston manufacturer Stewart & Stevenson Healthcare Technologies LLC, a subsidiary of Kirby Corporation that licensed ApolloBVM in April, has worked with the team to further manufacture the device into what it is today.

An enhanced version of the bag valve mask-based ventilator designed by Rice University engineers has won federal approval as an emergency resuscitator for use during the COVID-19 pandemic. Photo courtesy of Stewart & Stevenson

The Rice team worked out of OEDK throughout the spring and Stewart & Stevenson joined to support the effort along with manufacturing plants in Oklahoma City and Houston.

"The FDA authorization represents an important milestone achievement for the Apollo ABVM program," says Joe Reniers, president of Kirby Distribution and Services, in the release. "We can now commence manufacturing and distribution of this low-cost device to the front lines, providing health care professionals with a sturdy and portable ventilation device for patients during the COVID-19 pandemic."

Reniers continues, "It is a testimony to the flexibility of our people and our manufacturing facilities that we are able to readily utilize operations to support COVID-19 related need."

The device's name was selected as a tribute to Rice's history with NASA and President John F. Kennedy's now-famous speech kicking off the nation's efforts to go to the moon. It's meaningful to Matthew Wettergreen, one of the members of the design team.

"When a crisis hits, we use our skills to contribute solutions," Wettergreen previously told CultureMap. "If you can help, you should, and I'm proud that we're responding to the call."