April 30, 2013
You Got the Merger Done … Now What?
Mergers and acquisitions have long been touted as a strategy for small businesses to gain size and scale to pursue larger projects and clients. But often, the integration process is overlooked, leading to increased costs, decreased profitability, and sometimes, failed mergers. Scott C. Whitaker, author of Mergers & Acquisitions Integration Handbook: Helping Companies Realize the Full Value of Acquisitions (Wiley Finance; $59.85), warns companies that the process can be arduous. “One of the things that we stress right from the get-go is complete understanding of the task at hand and that it’s going to be incredibly disruptive,â€ he says. “It’s going to require a tremendous amount of time.â€
1. Is it a good strategic fit? This is one of the biggest drivers of failure post-merger. “It looked like it could tuck into your normal business, but your salespeople were confused by how to sell the new product, your distribution channels revolted, customers defected.â€ These are things that sometimes are overlooked or minimized.
2. Have realistic post-transaction expectations. “Often, synergy expectations are inflated or over-optimistic at the best. People say, ‘Well, if we buy them we will have purchasing power that will enable us to save this amount of money.’â€ Oftentimes, these expectations end up being too optimistic, or it takes way too long for them to be realized.
3. Avoid communication breakdowns. “We stress a 90-day communication plan that’s broken out by audience, by message, so you’re speaking to all those people at a regular cadence about the things that they care about the most,â€ he says. Without this, employees can become confused or distracted while they wonder how the merger is going to affect them.
4. Avoid a culture clash. It’s about understanding how differently do “these folks do stuff than us in all kinds of different ways.â€ He also suggests HR policies get rationalized and normalized quickly, “because if your vacation days are more than mine, I’m going to resent it. If your flex time is more generous than mine, I’m going to resent it until it’s equalized somehow.â€
5. Form an integration management office. “Typically you have a senior reporting level and then you have by function–finance, legal, sales, marketing, etc.,–a functional lead who is in charge of their function for the integration,â€ says Whitaker.
6. Develop an implementation plan. “There’s a process of prioritizing integration workstreams. You want to focus on things that are duplicative and drain resources or money. You’ve got to get rid of those. Things have to be rectified and ‘normalized’ for people to feel right about the new organization.â€