How to integrate Digital M&A transaction successfully

Digital M&A

For the Digital M&A to be successful, acquirers needs to create a seamless digital experience for their customers, employees and partners post acquisition.Technology has enabled companies to scale their market share by leveraging platforms and ecosystems of integrated digital products and services.Digital has intensified competition among companies.Hence companies in order to improve their competitive positioning in Digital look at M&A to acquire targets to either achieve economies of scale or economies of scope.

Digital M&A integration of platforms

Integration of digital platforms is dependent on the business model.The integration activities objectives would generally include:

  1. Developing and commercializing revenues generation products and services.
  2. Enhancing interactions and interfaces across a customer experience.
  3. Automating, integrating and accelerating business operations.

The merged companies needs to have an integration strategy that combines their digital organization structure, digital assets, technology infrastructure and products in a way that maximizes the value of the merger.
Post integration, the combined entity should be ready to launch new or enhanced digital products and services.When the integration is a failure then it can negatively affect customer perceptions, company reputation and business outcomes like revenues.
Before the integration starts, acquirer need to plan for these four steps in their strategy.

  1. Define an end state digital business model and associated technology vision.
  2. Manage talent acquisition and retention
  3. Clear accountability to speedy decision making
  4. Keep customers engaged and informed about the merger.

The above four points will allow acquirers to plan effectively, stay productive and communicate clearly with customers throughout the integration process.

Define end state Digital M&A Business model

  • Digital M&A strategy needs to be aligned with corporate strategy.The rationale behind the acquisition can be either to expand market share, access new markets or generate synergy of complementary product offerings/enhanced platform effects.
  • The integration strategy needs to be aligned to the rationale in order to articulate the end state goals for the digital experience. If the end goals is to build a stickier customer platform with diverse products portfolio then the integration needs to focus on bringing all the acquired brands and products under one platform with an unified customer experience. If the end goals is to acquire assets in a new strategic market then the integration needs to prioritize digital localization efforts. If the end goals is cost savings, then integration needs to focus on identifying the duplicate systems to sunset.
  • Digital experience objectives should drive technology decisions.Hence it is important for the integration team to get a clear picture of the current technology landscape and then define the future state.The integration team should inventory the existing applications and technology to identify systems to be sunset thereby rationalizing its portfolio.
  • The integration team also needs to conduct an assessment to identify the people, process, technology, cultural risks that could impact the ability to execute successful integration. Cultural risks is very critical and hence firms should examine differences in organizational culture and way of working.The integration team needs to have a clear understanding of the cultural differences between the two entities and then chart out an effective change management and communication strategy throughout the integration process.
  • Once the risk assessment is completed, critical risks that can be deal breakers should be flagged for executive attention. The integration team should create mitigation plans and assign ownership for managing these risks.

Manage Talent acquisition and retention

  • The integration planning needs to account for securing the right resources with the right skillsets. Lack of the right resources can impact the integration which inturn will impact customer experience and revenues.
  • In order to mitigate this risk, it is necessary to create a resource inventory for each department and function.This will provide visibility into the demand for specific teams and subject matter experts over time.The integration team need to plan for resources by either reallocating the internal resources for the integration activities or use temporary staffing models.The parameters driving resources needs will change throughout the integration, hence the resource plan needs to constantly reassessed and refreshed.

Establish the right Governance model in Digital M&A

  • Effective decision making is critical to achieve success in integration. Hence the integration team should establish the right governance structure with clear understanding of which stakeholders needs to provide inputs on certain decisions versus those who simply needs to be informed. A right governance structure will avoid ambiguity and reduce the chances of a wrong decisions to be made.
  • An accountability framework needs to be there with key accountabilities assigned to senior leaders.The leaders inturn cascade the objectives and activities to the rest of the organization. This will set a clear vision for how issues will be prioritized throughout the process.This will facilitate quicker decision making and allow integration team to manage trade offs.

Keep customers engaged and informed in Digital M&A

  • The integration should enhance customer experience and value.Hence to make sure the combined offerings enhance customer experience, the acquirer needs to be engaged with customers throughout the process. This requires integration team to coordinate with marketing, communications and technical support from the start to help manage customer expectations, deal with issues that arise during the transition and ultimately drive adoption of digital products. At the same time, the integration team needs to ensure that existing operational support is provided for new products and services.
  • A customer focused communication plan should be developed along side internal implementation efforts.The customer needs to be informed when system cut over impacts performance or cause key functionality to be down for some time.
  • The digital marketing and product teams need to be aligned with each other so that marketing messages are in sync with product teams service interruption warnings.

Final Takeaway

  • Integration phase in Digital M&A is never easy and few go exactly as planned. Hence depending on how well the acquirer is able to execute the integration of the merging entities digital operations would determine whether digital M&A has been a source of competitive advantage or a resource consuming distraction.