The merger and acquisition (M&A) fairytale goes like this: “I’m going to combine these companies and achieve great economies of scale – lower costs, less complexity.”
The M&A reality is more like this: “Disentangling key dependencies takes longer than expected, the best people leave at the worst time, processes don’t align to system changes in a few client-facing areas, security exposures are larger than expected, and extra resources have to flow into managing cultural barriers.”
Let’s entertain a third scenario: “The deal closes as expected, the integration management office successfully facilitates the integration through its ups and downs, and key leaders have the foresight to engage a clean-up crew to parachute into key battlefields. That team is experienced in on-the-fly diagnostics while delivering outcomes critical to customers and delivers a smooth transition to business as usual.”
The possible outcomes of Scenario #3 are as follows:
- Invoices are getting processed timely even as the invoicing process and systems are being tweaked and the integrated team is trained on the new processes and tools.
- Financial records from the acquired company are thoroughly examined, with issues categorized, prioritized and resolved expeditiously.
- Use cases, test scripts and other bottlenecks are drafted and executed with no delay.
- Application teams are receiving timely feedback to provide fixes.
- Operations teams may be working some extra hours but not all the time and seldom on weekends.
- Processes are being documented, training manuals updated, and expectations of talent clearly articulated.
- Leadership is enabled to focus on the big issues, not the noise.
- Dollars are allocated efficiently to preventing problems in the long run, not wasted on solving problems in the short run.
- Customer complaints are mitigated, employee morale is heightened, compliance violations are few – and profitability is preserved instead of slipping away.
- Focus moves to the future and to achieving the deal thesis, not the integration.
- Confidence to tackle the next deal soars!
In an earlier post, we discussed how to prepare for an acquisition, even before hearing that any such activity is coming. In another post, we covered the challenges enterprises encounter with acquisitions underway. Here, we offer the best practices for achieving Scenario #3, the one that leads to a smooth transition to business as usual (BAU):
- Understand the deal thesis, critical path and target operating models.
- Set the BAU expectations at the outset and ensure buy-in across groups early.
- Define what is immediately doable and build on success.
- Assemble a clean-up crew or SWAT team to engage, scale, deliver and fix things. The team members document and transfer knowledge as part of their culture.
- Enlist subject-matter experts with knowledge of your sub-industry, products, processes, systems, vendors and geographies to address business-side problems as they arise. Ideally, those experts are part of the trusted partner firm you’ve been working with to prepare for the acquisition and to address the immediate challenges following the signing of the deal.
- Maintain open and frequent communication focused on problems and outcomes – not on what happened or whose fault it was.
Mergers and acquisitions can be a time of dramatic change – exciting and rewarding when the integration, divestiture or joint venture goes smoothly, and costly when they do not. Integration work is no fairy tale. The pressure to deliver can be overwhelming. The best guiding principle is to get smart while getting things done and to get help quickly when needed to prevent small problems from getting bigger. The lessons learned and relationships cultivated will continue to deliver M&A success with every future deal down the road.