When Bigger Isn’t Better

I read with great interest the story of Saks’ acquisition of both Neiman Marcus and Bergdorf Goodman. These three fierce competitors in the luxury department store arena came together less than two years ago with the hope of creating a powerhouse retailer built on the strength of these three iconic brands. To say it has not gone as planned is an understatement.

Saks Global, the parent company of Saks, has declared bankruptcy. What happened?

As an independent brand, Saks was facing fierce profit pressure as trends in the luxury retail industry saw major, structural changes in how customers buy and how manufacturers present and sell their products. These challenges were not unique to Saks. Their two target acquisitions and closest competitors were facing similar struggles. The idea of consolidation was sure to bring reduced operating expenses and a stronger negotiating position with luxury goods manufacturers as greater scale and market penetration under one, unified organization took hold. This did not come to pass as the debt (procured to fund the acquisitions) outpaced revenue generation, which did not meet hoped for levels.

Acquiring a competing organization can bring unique opportunities, but these transactions are not without risks, pitfalls, and complications, some of which may not be readily apparent. The cultural fit between organizations is one potential challenge rarely considered. If the company being acquired is having difficulties, can these be effectively solved by combining operations with yours? Is your business facing similar challenges?

As with most significant business decisions, acquisitions are best done as part of an over-arching strategy and by plan. Notwithstanding that, there may be a time when an opportunity is presented that comes suddenly and unexpectedly. A sense of urgency naturally takes hold as the fear of missing out is front and center. It is for times like these that pre-planning pays the biggest dividends. By establishing a decision-making framework for evaluating opportunities, there is an improved chance that moving quickly will not result in missing key steps in information gathering and reaching a “go/no go” decision.

Under any circumstances, rapid growth (whether through acquisition, the addition of a significant new customer or the sudden expansion of an existing account) can bring with it a considerable set of challenges. Getting alignment of systems, processes, and people and possible near-term strains on cash flow are among them.

For more information on ways to effectively set your organization's plan toward sustainable, strategic growth, contact me at joe@ajstrategy.com or visit my website ajstrategy.com.

The preceding content was provided by a contributor unaffiliated with Printing Impressions. The views expressed within may not directly reflect the thoughts or opinions of the staff of Printing Impressions. Artificial Intelligence may have been used in part to create or edit this content.