The best part of a seminar or workshop is often the Q&A session at the end. As a presenter I love them. It’s a chance to add specific value to that one person who asked the question. So this blog post is dedicated to the Q&A session of an imaginary workshop on – Post-acquisition Integration. I’ve broken the questions into themes for easy reference. The answers are clearly longer than you could deliver at the end of a workshop.
- How do you set up an integration plan for success?
- The key is to think about it long before the “post-acquisition” phase! The acquisition process should contain plenty of opportunities to build a meaningful integration strategy throughout the process and continually validate it. Consider each department/component of the business from strategy, finance, legal, marketing, sales, production, engineering, HR, IT, etc and build the ideal “future state” in your mind.
- Prior to completion, set up a formal Integration Management Office (IMO) headed by the Integration Director. Include on the IMO team a few senior managers who have a strong grasp of your business and have also been involved in the acquisition. Confirm the key objectives of the deal and therefore the goals of the IMO.
- Create workstreams for each department area. For example in a recent acquisition we created:
- Supply Chain
- Each workstream has an owner from the acquirer and a buddy from the target.
- Create an overall objective for each workstream e.g. in a recent situation for HR we stated:
- Quantify the pay and benefits of the existing compensation schemes and make recommendations to harmonize terms for the new organization. Ensure new processes and protocols are in place in consultation with the needs of the local management team and the Group HR Director.
- Create detailed tasks with deadlines that move that department closer to the desired future state.
- Note that not all tasks will be completed by the end of the integration period, even if it’s 365 days. You need to decide how long the integration period – 6 to 12 months is standard. At the end of the integration period, all outstanding matters are then added to normal operational actions.
- Set up progress meetings every two weeks to keep things on track.
- IMO should report to group Steering Group every month to clarify progress, elevate strategic items for discussion and get answers to tasks that are stuck.
- Finally, I’d highly recommend automating this process which we’ve done on several platforms eg Midaxo.
- Why do these plans often fail?
- The biggest mistake we see is a lack of communication. People don’t feel included and don’t buy-in.
- Acquirers forget that employees have day jobs. They need time to perform these additional tasks.
- The plans lack detail and are far too generic. They are not tailored to the specific sector, specific geography or size of the deal. Plans are not one size fits all.
- The plans don’t link to the detailed work done pre-acquisition. Exposures and weaknesses discovered are not baked into the integration plans and are left to fester.
- Difficult decisions are put off and procrastination takes over. All the target employees want is clarity.
- Any tips for getting buy-in?
- Changing people’s minds is tough. It could be a sales prospect, a boss, an army of newly acquired engineers. The basis solution has one simple ingredient – it’s about them not you. So if we take sales as an example. Show a sales team that the acquisition enhances their chance of making more money, satisfying more customers and building a bigger business, you’ve won.
- Encourage target managers to reach out to their workstream owner. You are all part of the same company – act like it.
- Ensure slow decision making doesn’t antagonize the ex-owners and her team.
Psychology of Target Staff
- What are the target staff really thinking? It’s pretty obvious that people are concerned about job security. Employees that feel safe will probably move onto other worries. They will be concerned about the buyer ruining the company, disrupting relationships with customers, dropping large cumbersome policies on them and crushing that small company feel. So the acquirer’s tactics need to address these concerns. Firstly craft your initial messaging to newly acquired employees with this in mind. No false promises but emphasize the benefits of joining a larger successful group: balance sheet security, market share safety, career progression, investment resources, global reach, stronger customer value propositions.
Sectors & Geography
- Are Integration Plans Tailored to Each Deal? Whilst many post-acquisition integration plans have similarities acquirers need to be careful to form a plan relevant to the sector, size, geography, culture, deal structure and activities of the target. For example, a manufacturing deal will be looking at the future state of the target company relative to compliance, ISO standards, Demand Flow Technology, supply chain harmonization, digitization strategies and of course the ERP strategy. An overseas acquisition requires another set of thinking. Is language an issue? How will you integrate differences in culture? Be careful about blindly deploying an American way of doing things in France (and vice-versa)! The deal structure could be straight cash at completion, or it could include a 2-year earn-out. Difficult to go for complete integration on Day 1 if an earn-out is involved. Service Vs Goods business, a different approach required again.
I hope that helps answer a few questions and of course please feel free to reach out at Ian@TPPBoston.com