This post is written by Suzanne Francis, senior partner at Schaffer Consulting, where she leads the integration practice and collaborates with leadership teams on PMI efforts to accelerate performance and financial results.
A search of recent business articles shows a growing appetite for deal-making. While increased M&A transactions may be welcome harbingers of better times, agreements to buy are only the beginning. Achieving the anticipated gains requires thorough due diligence, clear goals for the newly combined business and a well-orchestrated integration effort.
It would be wise for finance executives who are pursuing acquisitions to buff up their integration “fitness” through these six steps before hunting for deals.
1. Use due diligence to assess integration opportunities and risks. Often, the emphasis on business valuation crowds out considerations of how to merge operations. Buried in the due diligence work is hidden treasure –- clues about what it will take to meld the businesses successfully. Without direct guidance to the due diligence teams to take this perspective, important insights are overlooked.
2. Start early –- kick off growth teams before closing the deal. Opportunities to penetrate new markets, expand the customer base or cross-sell can languish while integration efforts get organized. Without violating legal or ethical restrictions, much can be accomplished through joint planning teams. PMI (post-merger integration) best-practice companies take advantage of the time between announcement and close to size up opportunities and set aggressive goals for delivering initial gains.
3. Spell out the “merger intent.” Business Development typically puts together a business case that is presented to senior executives. With this as a starting point, the leadership team can flesh out what the combined business will look like in a year. Key assumptions can be translated into goals and assignments for integration teams.
4. Assess and refresh your integration resources now. What people, expertise, tools, and funds are you prepared to dedicate to integration work? Sufficient resources to create an effective integration process are essential to the success of any complex acquisition. Take stock of those assets now and identify gaps before you begin a deal.
5. Create protection plans for your “A” players. A merger makes your “A” players especially vulnerable to headhunters. Often senior managers of the acquiring company are surprised to learn that their own employees may be ready to make the leap. Uncertainties about reporting relationships and job security can lead to a loss of critical talent. Executives who have ready-to-roll “re-recruiting” campaigns will be less likely to lose their best employees and can engage them to lead the integration.
6. Treat integration as a training ground for your best talent. The challenges of integration will put even your best people to the test. So don’t let this extraordinary development experience go to waste. For everyone from the integration manager to the least experienced member of an integration team, there are opportunities to learn. Senior executives need only watch who and what emerge from one of the most visible and important development opportunities most employees will encounter in their careers.
These six relatively easy steps will allow you to successfully run the marathon that every PMI resembles. Take the time now to assess your M&A preparedness and decide how to make your organization among the “fittest” for post-merger integration.