You can’t get value intended if you can’t integrate it and you can’t integrate effectively without a good plan. The integration plan is one key to successful integration and therefore achieving the value intended. An effective plan is only as good as prior work.
Here are some of the critical errors I have seen at this step:
- Thinking the hard work is done because the deal was signed and all that remains is to turn over the M&A to some operations people to manage integration.
- Starting too late. Waiting until after the deal is signed and announced to begin planning. Integration needs to start the day after signing. Start planning during due diligence when you are 80% or so confident the deal will happen.
- Doing work at this stage that should have been completed earlier.
- Not developing a plan that starts day one with in-person meetings with employees of both companies and key customers and vendors.
- Leader of planning/integration management not part of the process from the start or at a minimum involved in planning.
- Dealing with ‘cultural issues’ only as a human resource issue.
- Emphasizing cost-cutting initiatives rather than revenue-driving initiatives.
- Not having core integration team on-site full time for first six to twelve months.
Who’s on the planning/transition team?
Someone from the senior management team MUST continue to lead from this point forward. Look at due diligence information, acquisition goals (Acquisition Profile) and answer the question: from what we know what has to be accomplished to make this a success? Think of critical functional personnel that need to be part of integration and put them on the team now. Also, you should have identified some critical areas and people from the target company that should be involved in integration management. Plan how you are going to bring them into the process quickly.
What is critical for integration success?
A PLAN!!!! with focus and speed. Slowness is driven by indecision during integration, poor front-end work, and no plan. Transitions are about speed and focus. The high moral ground is shareholder value. The difference between a prolonged transition and an accelerated transition is shareholder value.
The goals in your Acquisition Profile and information gathered in due diligence drive the actions you must implement. Within the first 100 days focus on actions that will increase value with the greatest probability of success.
Communication. Aggressively manage communications within both companies. The transition team MUST be on site the first day after signing to hold employee meetings communicating the how, when, and where the transition will occur. The communication plan needs to encompass both the acquisition as well as the acquiring company employees. Don’t forget about on-going updates to senior management over the entire span of the integration plan. People hate an information vacuum, if you don’t keep them informed the ‘grape vine’ will make it up. Where I have seen the most significant loss in company performance after the deal is when employees in both companies don’t know squat about what will happen. So, their first inclination is to ‘hunker down’ and keep doing what they did before. Always remember ‘people don’t resist change. They resist the punishing effects of change. Uncertainty is the most punishing effect and a clear path to failure’.
Personnel changes. Due diligence along with your SWOT will tell you the major personnel changes that need to be undertaken. The absolute worst thing you can do it keep people hanging. Employees know if they a vulnerable to losing their job and the more you drag it out the greater pain and suffering for people. Retain and focus key people to retain with self-funding, value-creation incentives.
Engagement of all employees. You need to think through how you will engage all employees from both sides. Bring them into the transition process not just the communication process. Due diligence usually identifies the formal and informal leaders in a company. Bring them onto the transition team.
Customers/vendors/competitors.
A plan for how each of these will be managed is important. Customers and vendors don’t like surprises. Competitors like the potential chaos that usually occurs during transition.
Critical elements of the Integration Plan.
The plan should include both organizations. Too often the acquiring company is short changed.
Structure and launch small, short-term, fast-paced transition teams focused on goals/actions.
Overall timeframe and goals. Even for a small deal your integration timeframe should be one-half to two years. Start with a 10-day horizon. After 30 days stay with 30-day increments for the reaming 11 months. After year one you will know the best timeframe going forward. Each month needs goals to be accomplished by the team.
Functional areas: Actions to be taken and goals to be accomplished need to be include at this level.
Managing the ‘culture thing’. Goals and actions must focus on the operating behaviors desired, i.e., what systems (hiring, rewards, advancement, policies, and procedures, etc. need to change or be reinforced? If you don’t have a clue how to approach this DON’T try and ‘stumble’ your way through it. This can take you down as fast as striking a bad financial deal.
Best Practices. The myth is that merged companies must implement the ‘best practices’ from each of the newly paired companies. NADA. Best practices are based on past practices. The right thing is NEW practices base on the new environment.
Take this opportunity to remove organizational barriers to economic value drivers.
A story before I go. Company was formed through six very quick acquisitions, with a new corporate headquarters, new leadership and no prior or current integration plan. When I was invited in by the CEO a seasoned employee had three- or four-months tenure and measured success by whether they had a desk and phone within the first two weeks on board. Also, it was hemorrhaging customers. What saved this train wreck? First, the parent company hired an excellent CEO who in turned hired a good senior management team. Second, the CEO and senior management team quickly prioritized the immediate and short-term goals and problems and brought in short term help. The management team went through an accelerated process I have outlined as they went about fighting day-to-day fires. I believe to this day that without the CEO and his right-hand person the COO the company would not have survived a year. Moral of the story, even at the end when the fire is hottest the way out is to go back to the start: why was the deal done?