Leadership Money & Finance

The 10 Rules of Acquisition Integration

The most important step of all acquisitions, which is often given the least amount of attention, is integration.

A Guide for Implementing an Effective Business Integration Plan

The most important step of all acquisitions, which is often given the least amount of attention,   is integration. Integration is the process of combining two or more organizations, each with potentially distinct cultures, while trying to manage the day-to-day businesses. Many decisions, large and small, from evaluating the capabilities of employees to assessing the compatibility of systems, will make or break the acquisition.

A well-defined and carefully managed post-acquisition integration process makes the difference between a successful deal and one that fails. Integration is so critical that the focus must be on this undertaking before the transaction actually takes place.

Integration primarily involves three phases.

 

Phase One – Integration Planning

Integration planning involves two significant undertakings. The first should take place during the negotiation and due diligence process. The acquisition team should identify the core competencies of both the target company and the acquisition company.

The second undertaking should take place between the signing of the definitive closing documents and the transaction closing. A joint integration team, involving members of both companies, should be created. The size of this team should be small and include only employees of the target company who are trusted and respected by the target company’s other employees.

The joint integration team undertakes the process of formulating the actual integration plan. This process includes management of an effective communication process between the employees of both companies, identification of cost reductions and identification of operating, administrative and management efficiencies.

 

Phase Two – Implementation

Implementation commences immediately upon the closing of the transaction and involves two specific periods.

Integration planning should target the first 100 days during which specific, decisive action takes place. This timetable creates a sense of urgency, challenge and excitement. Such action must be visible to the employees of both companies and should instill confidence and trust in management and the acquisition company. It is critical to the success of the acquisition that the “trust-building” process is not undermined. Hard decisions made during this period, as in the area of employment, should be decisive and well-communicated.

Implementation during the period after the first 100 days should follow a very logical and predetermined course of action. Termination or extension of leases, employee redundancy and asset divestitures should occur as planned, and not by happenstance.

 

Phase Three – Evaluation and Improvement

Early during the implementation period, measures should be established to monitor the progress of the integration. Specific individuals, accountable for business performance, should report at least quarterly to the integration team to ensure compliance with the integration plan, evaluate the success of the integration and allow for adjustments on a timely basis.

 

The 10 Rules of Successful Acquisition Integration

Rule 1: Acquisition integration is not a discrete undertaking and does not begin when the documents are signed. It is a process that begins with due diligence and runs through the management of the combined businesses.

Rule 2: Acquisition goals and objectives must be clearly developed so that all involved are clear on the priorities and what determines success.

Rule 3: Integration goals and objectives must be explicitly defined, so that progress can be measured.

Rule 4: Integration management is a full-time job and needs to be recognized as a distinct undertaking.

Rule 5: Decisions about management and organization structure, reporting relationships, layoffs and other employee matters should be announced and implemented as soon as possible after the closing.

Rule 6: A successful integration brings together not only the technical aspects of the businesses, but also the different cultures.  Get people working together quickly to solve business problems and accomplish results that could not have been achieved before.

Rule 7: Information Technology issues must be addressed early so that required resources are effectively integrated.

Rule 8: Objective and effective human resources processes must be developed in order to make key appointments, reduce uncertainty and retain key employees.

Rule 9: The “rules of the game” should be documented and cover the company’s values, management processes, strategic plan, employee conduct and performance objectives.

Rule 10: The willingness and ability to change course are critical to a successful integration.

 

Considering how much time, energy and resources an acquisition requires, appropriate consideration must be given to the integration of the businesses. In the absence of a well-designed and carefully followed integration plan, an otherwise successful acquisition will often result in a failed business combination.

 

Jan Beck Headshot 103014_BWJan Beck has served in senior management and on the board of directors of numerous companies and organizations around the world, drawing on his experience and training in management, law, finance and tax.

 

 

 


This article appears in the January 2015 issue of i4 Business.
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i4 Business

i4 Business

I4 Business magazine has become one of the most trusted voices for and about the Central Florida business community. Each month through our print and digital platforms, we provide access to meet, to learn from and to learn about some of the incredible entrepreneurs and business leaders, along with economic trends that are shaping our region.

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