Getting to closing is only half the battle of successful M&A. Successful integration offers significant value, but is surprisingly rare. A number of factors figure prominently in failed integrations. Those include:
- Missed or poorly defined targets. Without a clear and actionable plan, this becomes virtually inevitable.
- Losing key people. Without new organizational structures in place early, the most talented executives will leave for greater security and greener pastures.
- Cultural fit issues that affect how people feel about their jobs.
- Poor business performance. It’s common for integration to burn up so much energy that attention to the business lags. Competitors can capitalize on this.
A successful integration follows 10 key steps:
- Follow the money. A successful merger needs a well thought out plan for how the merger will benefit the company’s strategy. Soft numbers aren’t enough. You need clear details on financial matters. How will you build value? How will you structure the merger around this value-adding plan?
- Have a strategic plan. Your actions must be tailored to the deal’s goals. Generic advice and good intentions are inadequate.
- Address people and hierarchy issues early. The new entity must be structured around a new vision. Choose people from both organizations who are excited about the vision and sufficiently skilled to implement it. Announce changes as easily as possible, particularly if you’ll be cutting staff, to allow your staff to find new opportunities. Delaying crucial personnel decisions can slow the deal and drag down the new entity.
- Begin integrating as soon as you announce the deal. This means you must plan the integration well before announcing the deal. Consider using a clean team—a group of people operating under NDAs who can review competitive data and help you get things going more quickly. This allows you to quickly integrate as soon as you get the green light from regulatory bodies.
- Institute a decision management office: Endless paperwork can present a bureaucratic nightmare, and a real barrier to integration. Instead, recruit integration leaders to steer the integration and manage key decisions.
- Select the right leaders for the integration team. The integration team can make or break the deal. Don’t let people simply fall into this team. You need skilled managers who can dedicate all or most of their time to integration. Many companies opt to put the number two in charge of integration, thereby freeing number one to manage daily operations.
- Commit to a single culture. The set of values, norms, and assumptions that govern daily operations play a key role in a business’s success. They also affect how staff feel about working there. You need to decide what your culture will look like, and commit to a single culture early on. Cultural integration issues can wreak havoc on even the best deals.
- Win people over. It’s natural for people on all sides of the transaction to be nervous about a deal. This is why excellent communication is so key to a successful integration. Don’t make people feel forced into the deal. Highlight the benefits early on, and continue working to win hearts and minds throughout the process.
- Don’t lose momentum. Keep momentum going with excellent performance in both companies. It’s easy to get caught up in the excitement of the deal, but the merger will be anything but exciting with lackluster performance in either entity.
- Build a repeatable model of integration. Once the process is complete, take stock. Evaluate whether your plans worked, and how close you came to your goals. This can help you strategize even better for next time. And if your integration went off without a hitch? Congratulations! You’ve got a repeatable model!
Five Talents Financial Group
There comes a time when business owners should decide how they will handle the exit of their business. Prudent entrepreneurs do not leave this critical juncture to chance, they plan for it thoroughly and well before such an event should occur. Successfully navigating the sale or transfer of your business requires a dedicated and capable team. The members of Five Talents collectively possess nearly a century of business experience combined with specific industry training and certification. The skills and know how, combined with a deep commitment to the best possible outcomes for our clientele, enable us to provide you with advisory services you can feel secure with.
Give us a call to have a confidential discussion about what may be right for you and your family.