9 Steps for Your M&A Integration

March 30, 2021 Oak Street Funding

Companies choose to merge with or acquire other companies for many reasons, including creating a more robust competitive presence, gaining the ability to expand into additional areas or market sectors, and/or adding experienced employees who can foster further growth. However, one area that is often neglected in these transactions is M&A integration or the many facets involved in combining two separate businesses into a single company.

Before you begin the complicated and time-consuming work of searches, conference calls, due diligence, negotiations, spreadsheets, and contracts, it’s critically important to address M&A integration. It is one of the most critical parts of a transaction strategy, yet it is often neglected because so much energy is expended on the transaction itself.

Effective M&A integration creates strength

Achieving positive results and the desired return on investment (ROI) depends heavily on creating a new company that's more formidable and able to achieve more than the separate companies could achieve individually. Doing so successfully involves several steps:

1. Invest sufficient time into M&A integration

Don’t make the mistake of underestimating the effort and planning needed to execute the integration plan. Integration requires management, mental energy, and stamina and will probably take longer than you anticipate. Successfully blending separate groups into a cohesive team demands a collaborative, deliberate approach. Heavy-handed tactics (such as revising the organizational chart before getting to know everyone) often backfire.

2. Remember the “little” details

So much attention is invested into developing a plan to address the critical elements of an integration that you may overlook important "little" matters. For example, start co-branding or rebranding immediately, as it establishes the direction for the integrated company's identity and value proposition for employees and customers. Give employees scripts so everyone answers key questions confidently and consistently.

3. Communicate and follow-up

Communication with key customers, partners, and other stakeholders before the transaction is critical to preserve relationships. However, communication doesn't end with the initial announcement. In the weeks and months following the announcement, keep everyone (including customers) updated on the transaction's progress and what they can expect. Provide opportunities for employees, customers, and stakeholders to ask questions.

Be transparent throughout the process. Closed-door meetings and visitors coming and going will create gossip and assumptions. Hold meetings with employees to discuss plans for the business and growth opportunities. Also, be prepared to discuss issues such as changes in vacation policy, 401k match, part-time workers, office moves, parking, working remotely, and other policies. These issues are extremely important to employees, who will be anxious about potential changes. Try to introduce a positive change, like reimbursement for education or a benefit or holiday they currently do not receive.

4. Don’t make things up

If you don’t already have answers to some questions, it’s okay to say that no decisions have been made. Uncertainty is better than bluffing. Employees will handle an interim period communicated with honesty better than false assurances that there will be no changes or that everyone will keep their jobs.

5. Solicit everyone’s input

Ask your managers to solicit feedback from their direct reports. Inviting input shows employees their manager is part of the organization's future rather than a lame duck. Also, consider having a leader from the transition team meet with each employee for 15 to 30 minutes to solicit their ideas, talk about the integrated business's future vision, and discuss opportunities that might become available.

6. Remain visible

You'll be busy during the transition process, but it's essential to relate to employees at both companies. Avoid closing too many doors and booking too many conference or non-inclusive Zoom calls. Be accessible and while managing by walking around is essential, you will need to find a way to have friendly conversations and small talk even if team members are working remotely. Stay visible to customers, too. Your presence – in person or online - will reassure them.

7. Let the employees blend the two cultures

Fostering strong one-to-one relationships between people from both companies will make the transition less stressful and allow the cultures to blend more quickly. Consider creating a peer-to-peer buddy system at all levels based on similar roles in the two companies. New employees will appreciate having a "go-to" person for questions about processes, procedures, culture, and more, and your current team will be happy to bring them aboard.

8. Measure results

You won't know whether your M&A integration is successful unless you establish some type of measurement. Metrics reflecting the acquisition objectives are most compelling. Account retention and employee retention metrics are also critical. Make sure everyone knows the metrics you’re monitoring, and publicly share the results. Acknowledging employees who are helping to make the integration a success encourages more of the same.

9. Never stop refining your strategy

Even if your M&A integration proceeds more smoothly than you imagined, you’ll probably need to make refinements along the way to achieve your objectives. Work with employees from both companies to build a blended culture. Reach out to your clients to create an understanding of your now-larger business. Connect with your stakeholders to develop an understanding and comfort level with the changes that will occur in this exciting time for your company’s transition. Most of all, remember communication and visibility at all levels of the organization are crucial to success in any acquisition scenario.

Growing your business through a strategic acquisition can be exciting. Most acquisitions will require some degree of outside funding because buyers lack sufficient capital or are unwilling to tie up a large portion of working capital. As you’re developing the acquisition plan, you should also be working on a financing plan. Critical to this plan is considering the amount of risk you’re willing to assume.

If you are thinking about growing your business using an acquisition strategy and don’t know exactly where to begin, please feel free to contact us. At Oak Street Funding, we have experts in lending who have helped hundreds of clients make their strategic acquisition goals a reality.

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Disclaimer: Please note, Oak Street Funding does not provide legal or tax advice. This blog is for informational purposes only. It is not a statement of fact or recommendation, does not constitute an offer for a loan, professional or legal or tax advice or legal opinion and should not be used as a substitute for obtaining valuation services or professional, legal or tax advice.

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