In the world of M&A, virtually everyone everywhere focuses on and talks exclusively about the acquisition. Research, diligence, negotiation, pricing and asset purchase agreement terms and strategy.
For most, it’s all about the hunt.
Ironically, the hard work—and the make-it-or-break-it aspect of every deal– is successful integration.
The integration process, if not handled properly can be a field of land mines or a ticking time bomb. The potential for trouble, mistakes and obstacles is endless and infinitely variable.
Many, many deals that go smoothly on the front end, collapse and fail on the back end during integration. Most often, the reasons have a great deal to do with arrogance, ego and personalities. That’s true on both the buyer side and the seller side. However, most often, it’s a buyer attitude of we’re right, you’re wrong and it’s my way or the highway.
So, how do you reduce the chances for an integration melt down?
- The first and most critical step is for the buy-side team to begin the acquisition process with a deal team. Assemble a team of department heads representing all key parts of the company including senior management (preferably the CEO or at least the senior division executive) HR, Production, IT, CFO, senior sales and/or marketing, Operations, Digital, PR, etc.
- Have the deal team review and sign off on the NDA so they know what the confidentiality guidelines are that they will be working under. Then, provide them with a copy of any deal book or Offering Memorandum on the business for sale.
- Assign each member of the deal team with the job of conducting diligence in their area of specialty or focus and make it clear that they will need to develop the integration plan for their department or area of authority and responsibility.
- Schedule mandatory and frequent meetings with the entire deal team and require each to report on diligence progress and integration strategy for the entire team to hear and learn from. It is absolutely amazing how often it happens that one department head presents a report on diligence findings and integration plans that affect another department in a way that no one would have expected or could have anticipated. But, without that cross department knowledge in advance of the deal closing, major unintended expenses or problems can occur.
- Senior management should repeatedly drive home the fact that the deal team is charged with the job of identifying processes, programs, strategies and tactics that the company being acquired does better than the buyer. The message should be loud and clear that it is not a case of everything we do is right and everything the seller does is wrong. The buyer team should also be working to identify key talent and key knowledge keepers in the selling company as well as ways to retain them.
- Include the diligence team in as many face-to-face meetings with the seller’s management team as possible. The more they get to know each other and understand their counterparts as people and managers, the smoother the integration process can go. People begin to see people rather than the amorphous business.
- Develop and complete a very detailed integration plan of almost military precision. It must include a very specific time-table that has been established and vetted well before the deal closes. This plan should address every business discipline and department.
- Once the deal is done, communicate like crazy—at least daily in the first few weeks– with all employees about what has happened, why and what the future plans are for the merged businesses. After all, even employees on the buyer side will be nervous. There is always speculation about what any deal can mean for them.
- Manage by walking around both the buyer company and the seller company. Ask questions, shut up and listen. The rumor mill runs wild during the first critical months of any business integration. If not addressed fast and specifically, they can become a cancer on the business. Again, communicate from the top with great frequency and specificity. Repeat the questions heard and answer them for everyone in open communication across the merged company.
- Continue to hold deal/integration team meetings for at least 6 months after the deal is done. Make attendance mandatory for every deal team member.
Even with this seemingly simple integration process, there are no guarantees that a deal won’t collapse for unanticipated reasons. But, a planned, organized, disciplined process that assigns responsibility and ownership to a team dramatically improves the odds of success.
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Cameron Bishop is a partner with The Capitus Group. The firm provides comprehensive business value enhancement and transition strategy solutions. Partners and Advisory Directors comprise an experienced team of business professionals who have successfully owned, run, grown and sold companies. Capitus utilizes proven value enhancement and risk reduction techniques to enable superior transition options.