Verizon are trying to buy out their 45% partner Vodafone for $130 billion. Now that gets the headlines. But what about the small mergers and acquisitions that take place below the headlines? Most VC and PE backed businesses consider small bolt on acquisitions to help them scale. However very little guidance is offered to acquirers to ensure the successful integration of the target. This is ironic in many ways because these smaller deals often involve companies of similar size and so the post acquisition integration becomes really important.
I’ve noted below the essence of a good playbook to change the odds of success in your favor.
The mindset is quite simple. The mindset for integration (excluding the complete stand alone acquisition which frankly I wonder why bother) is to consider the fact you are about to add a material number of employees to each of your departments. You are about to onboard another 10,20,200 new employees and integrate them into your corporate structure.The more you think like that, the more effective will be your post acquisition integration plan. Consider the following when designing your integration plans:
- anomalies between acquirer and target sales commissions will require urgent action as sales teams talk.
- onboarding new customers
- reconciling sales process
- merging CRM systems
- organize immediate training related to closing sales and keeping customers happy.
- ensure live deals under negotiation are not disrupted by the acquisition.
- cleanse all sales forecasts ASAP and integrate the revised version into the group cash forecasting system.
- review cross selling opportunities between key customers of buyer and seller.
- Get control of the bank accounts, including check signatories and authorization limits. Ensure all accounts are receiving the best group interest rate now that the target is part of a larger entity.
- Establish operating budgets including capex with authorization guidelines.
- Establish a new management information report timetable. In the early stages of integration – metrics will be key.
- Review balance sheets for adequacy of provisions.
- Drive through planned cost savings quickly and effectively with clear communication. Demonstrate leadership.
- Tax and accounting matters related to regulatory compliance may require urgent action.
- Establish a reporting structure to ensure continuing trading is seamless.
- Review reward structures to ensure continuity of management especially if an earn-out excludes some key people.
- Do a quick and dirty review of problem employment contracts and put resolutions in place to minimize exposure.
- Establish a key meetings schedule to allow free and timely flow of information.
- Establish a clear understanding of the authority levels of the target’s leadership team.
- Deal with exposures revealed by due diligence, prioritizing those related to keeping the trains running!
- Articulate an operational plan for merging disparate systems or at least to allow them to “talk” to each other.
- Lock down the security around customer databases to ensure recent departed staff can’t access vital information.
- Communicate often and clearly with staff and key stakeholders externally, especially key customers.
- Visit key customers to articulate the strategy of the merged group and why it’s good news for that customer. (hopefully an overview version of this would have been done during due diligence.)
- The sellers will have signed off on the joint press release on the deal. This is a great opportunity to motivate staff and impress existing customers with the correct tone of message.
- Set a timetable for all web site changes and allocate a webmaster to drive the project.
- Collateral may need to change to reflect the new products of the merged entity.
- Don’t miss the opportunity to articulate the enhanced business result that will be achieved for your customers due to the increased resources of the merged group.
- Draw up a detailed checklist of leases, obligations, trade contracts, employment contracts, IPR, change of control provisions and articulate any commercial issues that require decisions by the leadership team.
- Note if an earn-out formed part of the deal, there may be quite onerous conditions regarding managing the newly acquired company. These will need to be factored into the integration plan.
- Insurance and risk exposure reviews should be conducted as a high priority.
Overall, the key message is to be prepared and to execute the integration with confidence. The worst thing you can do is to procrastinate. Make your acquisitions a success and remember nothing succeeds as planned but failing to plan is planning to fail.
The Portfolio Partnership, designs, executes and integrates acquisitions as Project Head alongside CEOs and their teams. Reach out before you contemplate your next (or first) acquisition for a health check on your process.