BUSINESS INTEGRATION POST-ACQUISITION
After you have completed the deal and you are now acquiring/merging with the new/additional entity, the process of integrating both companies into a single entity starts.
The post-merger integration phase is one of the most difficult phases of the merger and acquisition process because there will be differences in the companies involved — differences in strategies, differences in culture, differences in information systems, and so on. So, this phase requires extensive planning and design throughout the entire organisation.
The integration process can take place at three levels:
Five Strategic Reasons Why Mergers FAIL:
The sad reality about mergers and acquisitions is that the expected synergy values may not be realised, in which case the merger is considered a failure.
The following are some of the reasons why mergers fail:
While there are many more problems—including organisational resistance and loss of key personnel—that can lead to failed mergers, a solid due diligence procedure will help to avoid most, if not all, of these pitfalls.
WHAT ARE YOU GOING TO DO POST-ACQUISITION?
When the hard work begins
Planning to drive growth
Implementing the plan
To keep management on track, it’s not unusual to offer financial incentives. In companies where they’re in place, if members of the management team achieve 100-day plan goals, most frequent rewards are a one-time bonus. It’s important to note that often, but not always, incentives are tied to the successful execution of the 100-day plan.
Having different ways of creating value at the acquisition, sometimes implementing an outsourcing strategy is part of the 100-day plan. Services such as IT management and support, freight management, compliance, production and accounts receivable are functions that firms explore in terms of outsourcing. It really depends on the company. In some cases, outsourcing makes sense, and for others it does not, but either way, it’s important for firms to look at their options and then make a decision. In fact, it makes sense to look at what aspects of a company can be outsourced if it helps the company focus on the core business, for example, a service such as freight management can be outsourced because it is often not the core competency of the company.
A deep dive into the financial reporting systems can help drive improvements. Daily, weekly and monthly operating metrics, as well as month-end closing timelines and forecasting capabilities, are crucial, and they need to be set up during the 100-day plan. Without accurate financials and metrics for forecasting, it’s almost impossible for a company to put a plan in place and execute successfully. So the month-to-month accuracy of financial reports is particularly important.
The last piece of the equation in creating value is the depth and strength of the management team. You cannot underestimate this factor. In most acquisitions, the firm puts together a 100-day plan of what the firm is going to do. Every line item has an individual’s name next to it. Every week the acquirer should check in to see how people are progressing and hold each one accountable for his or her end of the bargain. The acquirer is responsible for driving returns, and those with the most checks and balances in place will find the job easier and requiring less negotiation.
After the first 100 days, next steps vary by company. But for all companies, it’s important to keep the focus on growth and moving the business forward. It’s equally important to stay on the same page with management as new plans are laid out.