Integration planning started long before an acquisition was completed.  During the due diligence process, we would look at the business we were acquiring and then systematically work out what level of integraton we would need in the businesss and over what period of time would we need to execute the integration.  Now when we thought about integration, we looked at the obvious things like finance, HR, systems and processes, products, marketing, and technology.  We also looked at cultural integraton and how we can bring the acquired company into the Group as an equal member.

Firstly, not every integration is the same.  You need to think about the requirements of each business and then tailor the integration to the business requirements. 

Next we separated the integration tasks into 3 phases.  The first phase, which was done as quickly as possible and was deisgned to make sure that we could track and monitor the financial performance of the acquisition.  We therefore focused in the first phase on financial integration – especially moving the new company to the REA Group financial platform.  During phase one we would also look for quick wins in cost reduction especially if the acquired company was paying for a service (e.g. ComScore) that we already had access too. 

The second phase of integration went deeper in the business takes a little longer and goes deeper within the business.  In this phase we would integrate the new site into the overall group of sites and ensure that there is linking between the sites as this helps SEO and cross site traffic.  We would also look at HR integration through the implementation of common systems and processes so that we could assess the people in the acquired business.  During this phase we would also send in the Group Performance Team that can be thought of as an internal consulting team that brings best practice into the acquired company.  This team would primarily look for ways in which the acquired company’s sales and marketing team could benefit from the knowledge and experience of the REA Group as a whole.

Finally, phase three is all about technology integration and this would take a much longer time.  When technology is integrated, it is about three things – internal technology (tools used for running the business), the products themselves (in this case the websites) and finally the hosting of the sites.  The underlying philosophy is that there are cost savings and efficiency gains from having a common set of internal tools, having a minimum number of data centres for hosting and finally having a common technology platform so that products could be launched faster and the overall cost of development could be reduced.  Full technology integration tended to take 6 – 12 months depending on other projects that were running in parallel.

The last and most important aspect of integration is cultural integration.  This is really a part of each phase and is something has to be driven by the CEO.  The onjective of cultural integration is to introduce the REA Group’s culture to the target company and then to align the company’s culture to the Groups’ culture.  This takes a while but is very important for the long term growth of the Group.

The last part of integration is leadership.  The approach we took was to assign a full time integration manager to lead all phases.  The integration manager was carefully selected as it is important that they are a great representative of the Group, have the implied authority of the CEO, and are able to truly lead the integration effort.

The internal consulting team was called the GPT – Global Productivity Team and reported into the Corporate function.  The team consisted of around 6 people who, in general, had long experience with the company and had earned their stripes through having operated in the field. 
The types of roles we had were consumer marketing, agent sales and marketing (classified sales), developer and third party sales (display sales), and editorial skills. 

Each country had a similar organisation structure and therefore the GPT structure mirrored the country structures.  Now the consumer marketing people in each country reported into the local CEO and not into the GPT and the role of the GPT was to work with the appropriate roles in each country to help solve problems and to help improve the overall performance.

A good example of this is how the GPT worked closely with th Italian business, casa.it, to increase the overall number of UB’s to the site and to also restructure the sales team to drive greater productivity.

However, there are always challenges with having an internal consulting team and a reader, Alain, has raised the following questions.

1) How do you effectively prioritize the consultant’s work? What missions/countries does he treat first?

2) How do you adjust prioritization in a rapidly changing environment?

3) Does it make sense to have an australian centric consultant when his mission is to take care of everything but australia? Wouldn’t a team of local consultants be better ?

These are good questions and not simply answered.  Firstly, prioritisation is always hard as either many people want the help of the consultant and sometimes those that need the most help dont want it.  The reality in prioritisation was that overall each country had a priority in the Group with Australia, the UK and Italy being at the top purely because of size of the business and the size of the opportunity.  Then within each of those, we looked at how far of best practice they were operating and then allocated the time accordingly.

Prioritisation can always be adjusted in a rapidly moving environment and that works best when everyone knows the role of the internal consultants and values their efforts.  We always worked on the theory that we would not impose the internal consulting team on a business that didnt value the consultant’s time. 

I think the quesiton about where the consultants reside is a very important one.  I am less concerned about where a consultant lives and more focused on having the best people in the role.  Sometimes this means that the consultants have to travel.  Having a team of local consultants only works if those consultants have the greatest knowledge and experience in delivering the results.  In practice, this is rarely the case as a country needing the help of internal consultants is often one that is not the best performing or is one that is at an early stage of development. 

Overall having an internal consulting team like the GPT enabled the Group to acheive a better balance between local operations and being part of an overall Group.

Having acquired the businesses, the next challenge for any CEO is how do you manage a global business in such a way that you encourage the local team grow as fast as possible while ensuring that the overall requirements of the of the company are met.  In addition, as the overall growth of the REA Group was being fuelled and financed by the highly successful perforamnce of the Australian business, it was important to ensure that the ongoing growth and success of the Australian business was not impacted.

The first step we took was to separate the Australian business from the overseas businesses so that we could maintain the strong profitable growth of the local operations.  This was achieved by appointing Shaun Di Gregorio to be the General Manager of the Australian operations and at the same time, we created a corporate team that was responsible for driving the growth of the complete company. 

This separation of Australia from the corporate team allowed the corporate team to focus on putting in place common reporting and finance structures, driving the overall growth (organic and acquisition) of the business, and finally establishing a consistent approach across the company to sales, marketing, and technology so that experience and knowledge are shared across the Group.

We then looked at how the countries reported into the corporate structure.  What was clear is that the larger countries (Australia, the UK and Italy) all had the capacity to survive and drive their own growth.  They had internal finance and HR teams as well as enough staff to be self sufficient.  These 3 countries reported into me as CEO.  The other countries (New Zealand, the UAE, Hong Kong and the Greater Luxembourg Region) were all smaller countries and didnt have the infrastructure to be totally self sufficient.  It was therefore decided that these countries would report into the GM of Emerging Countries and therefore would have a strong leader representing them and their different needs.  It was important that they were not lost in the overall Group.

To help drive consistent performance across the Group, we established the Group Performance Team.  This team had specialist skills including consumer marketing and industry sales and marketing and these skills were avaiable to country in the Group to help them address issues that they were facing in their local markets by bring external knowledge and consulting to bear on the problem.  This approach worked extremely well and helped a number of countries rapidly address issues that would have taken months of trial and error to resolve.

We also took that approach of centralising (were appropriate) the technology of the business.  The key areas that were rapidly centralised were internal tools including finance, CRM, HR systems etc.  It was important to ensure that no matter what office you were in, we were able to have a similar way of doing business.  The next step in the centralisation of technology was to look at how we moved all countries to a common platform (the REA Group platform) and how we reduced the number of data centres.  The reason for this was to improve reliability, increase speed to market and to reduce the cost of technology management.  (I will talk about this more in a future post).

The last challenge in leading a global business was how do you drive a consistent culture across the group.  This is definitely worth a separate post.

The net result of this approach was that we put in place a structure that allowed us to grow and manage a global business and as a result, the REA Group was a leading global player in the online real estate industry.

Over the last 2 years, the REA Group has acquired 15 different businesses.  These acquisitions split broadly into capability enhancement, consolidation of existing markets and the entry into new markets.  The acquisitions that were entries to a new market include propertyfinder.com, casa.it, the atHome Group, propertyfinder.ae (UAE), and squarefoot.com.hk.  The first acquisition based entry to a new market was the purchase of propertyfinder.com in the UK. 

The initial experiments with moving into New Zealand demonstrated that there was the chance of creating value in these new markets.  However we also realised that organic entry was really only appropriate where we had an asset that we could leverage (e.g. the traffic to the Australian site) or where the market structure was early stage.  (See Analysis – Four Types of Property Portal Markets on our sister site – www.propertyportalwatch.com)

Therefore we identified that the next step in overseas expansion would have to be through acquisition and that due to the uncertainty associated with early stage markets, we focused on the maturing markets.  

When we did a high level scan of maturing markets, it was clear that the UK was the most attractive.  Firstly,
it had a similar agency structure to Australia, secondly it had a similar property portal market with sites operating the same way as in Australia, and finally, we were able to operate seamlessly in the market as there was some experience in operating a business in the UK and of course language was not a problem.

The next step was to identify the potential targets in the UK and this was a relatively simple task – we just looked on the net.  Research showed that the major players were rightmove.co.uk, findaproperty.co.uk, primelocation.com, propertyfinder.com, and fish4homes.co.uk.  We sent each of them an email and set up meetings over the course of a week.  During the course of these meetings, it became apparent that the UK property portal market was very similar to the Australian market and in some ways, a couple of years behind in development.  It also became apparent that propertyfinder.com could be purchased as it was majority owned by a UK VC fund and they were considering exiting the business.

At this point we decided to bring in News International as a partner on the deal as to help reduce the risk and to gain the support of a local media company.  Having negotiated a deal with News International we then negotiated the rest of the deal with propertyfinder.com and conducted due diligence.  Our preferred method here was to have local consultants do the legal, financial and tax due diligence while a dedicated internal team does the technical and operational due diligence.  It was through this approach that the REA Group acquired 50% of Propertyfinder.com (with News International acquiring the other 50%) and the business was integrated into the REA Group.

Once we had acquired propertyfinder.com and focused on building out the business, we then started to have new opportunities pitched to us.  We therefore became aware of casa.it and the atHome Group based out of Luxembourg.  Both of these were analysed based on their market potential and the value that the REA Group could bring to them.  Both turned out to be good acquisitions for the Group with casa.it being the market leader in Italy and the atHome Group delivering strong profit growth.  There were other site referred to us however they didnt fit our expansion criteria and we walked away from them.

Following the acquisitions in Europe, we started to think about emerging markets and what we do there.  In the property portal game, emerging markets are about longer term investments and that means understanding where the basics are strong, investing in a business in that market, and then watching very closely.  We took this approach with the United Arab Emirates and with Hong Kong.  In both cases we identified targets and then took equity stakes in them.  In the case of the UAE, the REA Group now owns 51% of this with the founder working an earn out while in Hong Kong, the REA Group has now acquired 100% of that business.

In going global through acqusition, the key lessons we learned were:

• Select your markets carefully however nothing is better than spending the time in the market
• When you have selected your target move quickly and negotiate with purpose
• Conducting of due diligence will require time and effort and you need to have a dedicated team to do this – one that does not impact the current day to day operations.
• Partnering is an acceptable way to reduce risk but you need to select your partners carefully (more about this in a separate posting)
• Once you have acquired a business you need to move fast on integration and you also need to have a dedicated team to oversea this.