Why do we pursue add-ons, and what are the strategic considerations behind them?
Peter: Good morning, Raphael. Thank you for taking the time today to talk about the exciting topic of add-ons. NITRADO has been very successful. You have acquired two major US players in your segment and recently a small Swiss company. Why do you pursue add-ons, and what are the strategic considerations behind them? What exactly is an add-on?
Raphael: An add-on is a company that we did not previously own. By acquiring it, we can benefit from their capabilities, which we did not have before. We pursue this because there are companies out there that do things, and often do them better than we do. They have different market penetration in specific global markets or a specialization that we lack. For us, it is important to add these companies to better leverage strategic opportunities. We have already integrated two companies and are in the process of adding another.
What were the advantages?
Peter: You mentioned strategic advantages. Can you elaborate on this with the examples of the two US players, APEX and MCP? What were the advantages?
Raphael: NITRADO offers over 100 games on privately rented game servers and is proud to be the world leader in this segment. Our extensive offering includes many games that are seamlessly integrated into our platform, providing our customers with a wide selection.
The companies we acquired, APEX Hosting and Minecraft Pro Hosting, specialize in Minecraft. This game is considered one of the most successful of all time and has a huge fan base. The companies developed unique features and special services for the Minecraft community, allowing players to customize their experience.
Another advantage was their specialized customer service, which focused exclusively on Minecraft. This specialization led to high problem-solving competence and customer satisfaction, resulting in strong market penetration in the USA. Despite our global market leadership, we did not have the same penetration in this segment and market as the two companies did.
Through the integration, we were able to adopt their features and specialized customer service, as well as significantly strengthen our market access in one of the largest and most important video game markets in the world, the USA. This has helped us to solidify our market position and improve our offerings for customers.
What were the challenges when you integrated these companies?
Peter: That sounds like significant advantages. What were the challenges when you integrated these companies?
Raphael: Every company has its own culture and even subcultures within departments. When merging three companies, we encounter many different ways of working and duplicate functions, such as in marketing or customer service. The challenge is to consolidate these redundant functions and leverage synergies to increase efficiency without compromising performance.
It is important to involve people and be honest with them. Everyone knows that consolidations are inevitable and positions may be eliminated. Therefore, we need to communicate openly and clearly outline the benefits of the integration.
Our leaders play a crucial role in motivating their teams and guiding them through the transition. The main challenge is to get the employees on board, motivate them, and ensure they understand and embrace the benefits of the merger. This requires sincere, transparent communication and the ability to credibly convey the perspectives of all parties involved.
How did you manage the communication and integration?
Peter: How did you specifically manage the communication and integration?
Raphael: It is crucial that the management of the acquiring company is accessible to the new employees. This means that we must present ourselves continuously and at all levels, not just sporadically. The new employees need to build trust, so presence and sincerity are important. We took the time to clearly and credibly outline the benefits of the integration.
We implemented various measures to improve communication. One of these was the introduction of regular Town Halls, where we inform all employees about the status of the integration and answer their questions. These meetings provide a platform for open dialogue, allowing employees to express their concerns and fears.
Additionally, we introduced formats like Fireside Chats to build personal connections and strengthen the sense of belonging. We quickly established visible signs of integration, such as consolidating the corporate identities. This included unifying logos, PowerPoint templates, and email templates so that everyone could see they are now part of a larger whole.
An important point was ensuring that there are no first- and second-class employees. Everyone is treated equally and as part of the larger whole. Through these measures and deep honesty in communication, we were able to create a positive and constructive atmosphere where the new employees feel welcomed and valued.
How did you prepare your leadership team for this integration?
Peter: How did you prepare your leadership team for this integration?
Raphael: The most important thing was to sensitize our leaders to the emotional and psychological needs of the new employees. We didn’t conduct complex training sessions but relied on the emotional intelligence of our leaders. They needed to understand the uncertainty the new employees were experiencing and project empathy and calm. It was about winning people over on an empathetic level, not with overbearing self-confidence.
It was also important not to simply mandate changes but to explain them with convincing arguments. Our leaders needed to be able to provide good reasons for why certain things were being done differently to positively engage the majority of the employees.
Are there areas you wouldn’t touch during an integration?
Peter: Are there areas you wouldn’t touch during an integration?
Raphael: Yes, definitely. There are reasons why these companies were successful, and some of their strengths should not be changed. During integration, we need to carefully examine which factors contributed to their success and preserve them. This is a very deliberate process. We keep many things running as they were before the acquisition because they work well. It is important to learn from the best practices of the other companies and integrate them into the overall organization. This requires restraint and openness to adopt the best methods without jeopardizing the success of existing structures.
How would you measure the success of an integration?
Peter: How would you measure the success of an integration?
Raphael: The success of an integration is primarily measured by numbers. The key factor is whether the company’s earnings are the same or better one to one and a half years after the acquisition. It’s about the overall assessment of all three companies. Besides the numbers, the human aspect is also important: How loyal are the employees to the new overall structure? What messages do they convey externally? In the long term, success is shown by whether the key knowledge holders remain motivated to contribute to the larger entity.
Peter: Raphael, thank you for the exciting insights into the integration and acquisitions at NITRADO.
