A successful deal is just a theory until value can be realised.
Realising value from a merger or acquisition involves identifying the synergies between two companies and delivering against them. Far more importantly, it requires careful planning of how to drive these synergies through in a disciplined way that enables you to integrate with minimal disruption to business as usual. The last thing you want is a deal that destroys your existing value.
An integration is a major project and if not managed appropriately with time and financial accountability it can destroy more value than it creates. Managing the process successfully is not straightforward as no two integration projects are ever the same, but there are a few rules to follow to make it easier:
Commit to one culture
Cultural analysis should form part of your due diligence and deciding which culture will prevail (and it is not always the acquirer’s) is an important decision. Everyone from the CEO downwards needs to reinforce the chosen culture, and senior executives should consider carefully the fit with the new culture in making decisions about which people to keep.
Act quickly
The new organisation should be steered by people who are talented and enthusiastic about the success of the new venture. People decisions only get more complicated with time – corridor gossip can lower morale and uncertainty over who stays and leaves can help your competition poach employees and customers. For these reasons it makes sense to begin integration as soon as the deal is announced.
Handpick the integration team
Whoever leads this should be strong on strategy and process. However, it’s also common for an external party to advise at this stage. They will not be swayed by internal bias and can deliver the process objectively.
Win hearts and minds
Communication, both internally and externally, is vitally important for the future prosperity of the business. Customers and clients need to know they’re still your number one focus, while mergers will make people nervous, so clear vision and consistency is important. Focusing too much on synergies for example could be a bad initial move as this will typically mean cost reduction and that usually means headcount – your people will realise this.
Don’t lose sight of your day-to-day activity
Strong leadership is required here to make sure people are not caught up in the glamour of a significant deal. Media coverage might be inevitable and being in the spotlight can be a novel feeling, so management needs to make sure it is spending 90% of its time managing the business. Having number 2s concentrate on integration means departmental leadership stays on task. Creating incentives and targets is another way to ensure this happens.
Debrief after a deal
This is vitally important. Some people will have performed extremely well over the course of the process and should be recognised. Capturing the positives and negatives will allow the leadership team to plan for their next deal.
Measure success
Measuring the success of the deal can be done by reviewing the targeted synergies versus results. Diligent project accounting also keeps the organisation accountable.
Once again, an external party can objectively look at this and look at how these results should affect the future strategy of the business. Here are a few starting points:
– Have more customers been lost than were anticipated?
– Is the business in a better market position than anticipated?
– What is the impact on financial forecasts?
The role of a strategist in the merger integration process is vital. Planning and staying one step ahead in a period of inevitable uncertainty is invaluable when an organisation is at its most vulnerable. It is likely to be the difference between a game-changing move and an expensive mistake.
This is our second blog on strategic due diligence, you can view the first by clicking here.