If your business growth strategy is acquisition, and you want to get the most value out of the deal, you must prepare and budget for integration before you close. It is a misconception that the integration of the acquiring and acquired businesses starts after the deal is completed: it starts well before that. In short, the earlier you start, the more likely you are to be successful in getting the full value out of your purchase.
Preparation is key
Once the acquisition has been announced everyone can readily observe the integration tasks taking place. However, a lot of planning is necessary for this to go smoothly. Before that announcement, the reasons for the acquisition are carefully articulated to become the foundation of the integration work. The acquired employees will want to hear about why you acquired them, and how it will affect their lives. For the owner it’s just business, for the employee it’s their livelihood.
The acquisition announcement appears to be an easy task: it looks like a senior person stands before the acquired employees, speaking sensitively about the change that is about to affect them and the positive events ahead.
The reality is hard to do well: this is the most important day in the recent history of the company, perhaps the entire company history. To the acquired employees, every word you say is played over in their heads after the meeting is over. Acquired employees are often nervous – they’ve heard the horror stories of other acquisitions, so they look for clues in everything that is said – or not said, hoping to get further insight into their future. Those who didn’t know about the acquisition before the announcement want to know what’s going to happen to their job, the product they’ve worked on for years, or what’s going to happen to their place of work. The announcers need to anticipate all the possible questions or reactions beforehand. Their message must build trust and credibility.
In addition to getting the announcement right for the acquired staff, there are other interested parties (audiences) who want to know how the acquisition will affect them: customers, suppliers, channel partners, the press, and employees in the acquiring business. Each will want answers to their angle on things. Each will want their own questions answered: the trick is to customize your communication so you address the specific concerns of each group .
When should you think about integrating your acquisition?
The Deal Team are the group of people who run the acquisition. They find, negotiate, and purchase the business. At some point during the confidential phase, the integration team is introduced. This is typically mid-way through Due Diligence. However, you need to select your integration experts before that.
- If you intend to use employees to staff your integration team, we recommend you identify the team you want to use when you start Due Diligence. This will give them time to be ready to go when they are introduced to the transaction.
- If you intend to use external help, you will have to start earlier. Do your research and select your external help before Due Diligence. If the deal looks like it is going to happen, hire them early in Due Diligence, and bring them in mid-way through Due Diligence.
What if the acquirer is late to bring-in the integration team?
Acquiring a business is an extremely busy time, and many acquirers are focused on their primary purpose to close the deal, consequently they bring-in the integration team too late. Unfortunately, this happens all too often. The failure rate of M&A is consistently around 70%, with this lack of preparation being a significant contributor to that poor statistic.
Almost fifty years of research have shown that the earlier you start, the more you increase the odds of success. This has been proven many times over by the best in the business. They start integration during a time that is considered to be “extremely” early: before the Letter Of Intent (LOI) is written. These high performers include their Integration Team in the value assessment process of the business being looked at as a target: after all, this is the team that will have to deliver the value; they should know what is possible to achieve.
- In a few years’ time bringing in an integration team before Due Diligence could be the norm, however for now it is businesses like Cisco Systems that lead the way on successful acquisition integrations.
The Benefits of an Early Start
There is a two-way street of learning and benefit to bringing the Integration Team in as early as possible:
- The Deal Team benefits from the knowledge held by the Integration Team regarding what can be delivered. Over time, the Deal Team learns how the money can be made and improves their target selection
- The Integration Team benefits from fully understanding the strategy of the acquisition. This makes it easier to communicate to the various audiences why they acquired this business, at this time
The early involvement of the Integration Team brings the benefit of an easy information exchange. Before closing, there could be a few teams at work, including:
- A Pre-Deal team, helping a business be sold for the highest price possible
- The Deal Team working feverishly on the transaction
- The integration team (like Intista) getting the actual processes of the integration started and helping to reassure the employees that this will not be the type of acquisition that they hear about most of the time.
The Pre-Deal and the Deal Team have learned plenty over the months that lead up to the sale and purchase of the business and can help tremendously:
- For example, if the Integration Team understood that a member of the selling leadership team is about to get divorced, it will help understand their lack of motivation to be involved post-acquisition, their desire to sell the business and to move on with their new life.
This type of information is not easy to weave into an email, but it is extremely valuable. These cross-team conversations transfer lots of relevant information that can help the integration succeed.
The earlier you bring in the integration team, the more you are helping yourself to be successful.