Strategies for Successful Integration of your Acquisition Part 1

May 14th, 2012

Businesses routinely look at Mergers and Acquisitions as a growth strategy to expand into new markets, lower operating costs, increase shareholder value, or even to realize tax benefits.

When executed successfully, a merger can be a significant benefit to a company’s bottom line; however, the majority of acquisitions fail to deliver on their expected value.

Often, it is less a than ideal integration process that holds back the synergies. What can your company do to help ensure that your merger integration is successful?

Merger integration is a complex process; therefore, a comprehensive plan should be developed and implemented to manage difficult decisions and help maximize the potential of the new organization.

The main objective is to move quickly without missing opportunities and with a minimum number of disruptions to the organization.

There are several aspects that companies should focus on during integration, incorporating key milestones related to day one readiness and during the first quarter of operations. Those include:

Day one readiness

  • Prepare early, optimally during the due diligence phase
  • Perform a full process review to identify best practices and potential process improvements
  • Develop a day one plan that incorporates regulatory and organizational components as well as a communication plan for key stakeholders
  • Prioritize key elements for day one such as financial reporting and cash management while relegating non-critical functions to phase two initiatives.                                  Part 2 of this post will appear in our next Blog.

2 Responses to “Strategies for Successful Integration of your Acquisition Part 1”

  1. Rick Maurer Says:

    Good advice. I’d add one thing. Since research indicates that the failure rate of mergers is still appallingly high, I’d study what others have done. What’s worked? What are the common pitfalls? What pitfalls are we likely to encounter unless we are careful?

  2. bobcohen Says:

    Hi Rick
    Thanks for your excellent questions. We really appreciate the feedback. Historically, M & A has resulted in many failures, but does it have to be that way forever? I’d like to think acquirors can learn from past errors without necessarily repeating them.

    I’d like to think particularly for the Staffing Industry the high failure rate for some acquisitions are becoming fewer and farther apart. Our industry works on such low gross margins and net profit levels it doesn’t leave a lot of room to hide your failures. I truly believe that most M & A failures including those in our industry are caused by an arrogance that basically says, “we’re bigger, so we must know better”and before they even know or understand the often subtle elements that made the acquired company so attractive to them that they wanted to acquire it and often purchased it at an attractive price and on favorable terms for the seller. They then install their “system” of operating with their proceedures, their forms, their policies and systematically destroy the morale of the acquired management staff whose heads are spinning from absorbing the rapid changes and trying to explain their merits to their staff and customers when no one has taken the time to explain it to them. Soon, their key staff with less at stake and often a lower commitment to the success of the joint venture brought about by the merger, begins to polish up their resumes and call their favorite industry recruiter and seek greener, more settled pastures. When one star performer leaves, morale drops further and others follow and it is usually the fastest swimmers that dive into those waters first. The mediocre performer doesn’t have the track record, the presence or the confidence to actively seek alternative employment, they can’t affordfor this information to get back to their current employer. So who does the acquired firm get left with, sadly, it is often those slower swimmers who achieve mediocre results. At this point, the Buyer wants to clean house, but knows if they do that they will likely destroy any chance to make this acquisition successful, in any reasonable time frame. Further fallout comes from the Bankers/lenders that backed their deal with their money that they have to account for to their superiors. Now there is a downward spiral that very tough to turn around. Excuse me, I didn’t intend to offer such a long answer, however, we are passinate about this subject; it is because we have informally studied what creates a successful and unsuccessful acquisition. Some of our observations are mentioned in Part 2 of this posting.
    “There are several common issues that often derail mergers, including a lack of planning, underestimating the scope of the initiative and failure to communicate. These issues can become apparent within any facet of integration, and can result in inefficiency during the process and an increase in costs involved.

    Cultural considerations are also often underestimated in a merger environment, and it cannot be assumed that synergies are going to be achieved quickly. What the merger is going to mean to the people involved such as employees, customers and vendors, tends to be overlooked and can be a significant concern, if not addressed proactively.

    Management must be upfront in communicating the goals for the merger as well as how business processes will change in the combined company.

    Concerns regarding topics such as relocation, the shifting of job roles and any new tools or software that will need to be learned are often prevalent in a merger environment.

    The fear of the unknown can be very real for those affected by the merger, and it can have a significant effect on productivity.”

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