- December 2, 2019
- Posted by: Ramkumar
- Category: Mergers And Acquisitions
10 Do’s and Don’ts for a Successful M&A Integration
The initial 12 months post-close in M&A integration are the most significant for achieving synergies. At the commencement of a regular M&A integration exercise, the integration team applies the deal model and due-diligence results to recognize opportunities and fix synergy targets. An effective accomplishment of synergies quickly after the deal close assists in achieving wins early and builds a foundation for gauging progress on other long-term efforts.
M&A Integration tip 1 – Belief in Speed
In previous years, the traditional sense of the integration method supported a slow transition. This thought was utterly mistaken. Fundamentally, employees dislike a gradual integration process. The strategy lets obstacles fester, and it misses to take hold of the energy roused up by a merger transaction. Staying careful during mergers and acquisitions implies moving swiftly. Speed is an ally. A speedy integration strategy that exhibits a clear sense of seriousness endures far more commitment than an approach based on discretion. The blunders that come from moving fast are trifle contrasted to the difficulties of proceeding too slow. Delayed transitions have notable detrimental results to the bottom line.
From the start, it is necessary to set the expectation for moving swiftly into the integration process. The acquirer should display urgency, showing that the new entity is result-oriented. The “opening gambit” should be devised to demonstrate the speed the acquirer expects to maintain. It also should be stressed here that the employees of the acquired company will make their own decisions about the acquirer by perceiving what it does instead of hearing what its superior managers speak.
M&A Integration tip 2 –Reassess the order of priority
While speed through integration is necessary, productivity is just as important. The announcement of an acquisition presents new learning to a company. It transforms the landscape. This approach entails a reevaluation of ongoing projects. Businesses will discover that, upon the announcement of a deal, many projects are no more critical. Others require adjustments given to new precedences. Reassessing priorities ahead in the process helps prevent parallel demands from striving for people’s time and energy while assuring that the most financially rewarding activities are continued upfront.
M&A Integration tip 3 –Plan quick victories
Sadly, significant transitions such as mergers are, by definition, plagued with difficulties. These challenges are not fundamentally signs of an erroneous consolidation, poor control, or an inadequate integration strategy. Instead, they usually are only symptoms that a merger is proceeding. Mergers always present a set of general predicaments, and the antimerger group applies this to strengthen its argument. Hence it is necessary to engineer some quick wins. This approach means executives should immediately identify easy steps to achieve successes, make sure those gains are accomplished, and then broadcast them publicly.
M&A Integration tip 4 –Stay on the top
Significant organizational change induces a business to become more reflective. This change is particularly valid during merger integration. After the deal announcement, the attention of both organizations shifts within. Due to this inner bearings, companies usually get diverted from the existing operations of the business.
The most susceptible operations of the company are sales, service, and information systems—that is, the critical touchpoints with the customer and the infrastructure that sustains them. Many companies undergo a decline in sales and report increased complaints about customer service soon after a merger. It’s something merging organizations cannot allow to let occur. The company is already in the spotlight, by analysts, management, employees (of both organizations), and customers all examining how the transaction will influence business. If sales and service begin to suffer, people criticize the merger and typically start to challenge the feasibility of choice to merge. Furthermore, customers begin retreating to competitors, protesting that the merging organizations have now dropped service.
Executives must discern that to shield these essential areas. Specific attention is required to preserve sales and maintain service measures. The situation beckons for new energies—high-powered plans that grab attention and generate outcomes. This approach can incorporate short-term sales incentives or merger training and learning for customer service personnel at help desks and call centers. Another likelihood might be appropriate advocacy directed at reaching to customers of the newly merged organizations’ and displaying a commitment to service. Whatever the basic formula, efforts to increase sales and function need to be carefully engineered and promptly executed.
Source – Research Gate
M&A Integration tip 5 –Utilize the uncertainty
It is crucial not only to persist during the change created by the merger or acquisition but to flourish on it, to utilize the turbulence. Managers generally respond by striving to sustain the organization through the transition, attempting to restore things to normal. But this is an unlikely task as well as a squandered opportunity. Management should apply the transition phase as an opening to make necessary reforms that may be wholly independent of the merger. People are anticipating change. The business is in evolving anyhow. Hence one can achieve things that would be far more challenging, if not improbable, under typical situations.
Among other things, changes that are generally acknowledged as much needed and long-awaited can be executed concurrently with the integration. The acquirer needs to consider the consequence of intended changes against integration initiatives. Some of these changes hold enormous financial implications and strategic significance. The moment has come to realize the uncertainty and get these changes executed.
M&A Integration tip 6 –Communicate lofty expectations
Executives should excite the employees of the target company by establishing new and slightly higher measures of performance. This period is a suitable time to get people to stretch. As discussed earlier, mergers and acquisitions make people check their behavior and reevaluate their mode of operation. This contemplation and the disruptive effect of the merger prompts employees to be much more ready for behavioral change. Shrewd executives will grab this opportunity to ask more of the employees’ potential into play.
It is essential, though, that the acquirer state explicitly any new and additional performance criteria. The acquirer’s executives should display trust in the target company’s employees’ capability to measure up.
In a regular post-merger environment, though, is (1) expectations are not communicated openly at all, and (2) employees in the acquired business anyhow get the sense that the acquirer sees them as less competent to meet new performance criteria. Consequently, employees in the acquired firm grow less motivated and experience a loss of self-confidence.
M&A Integration tip 7 –Give a sense of corporate objective.
The acquirer needs to structure organizational goals for employees immediately. This process renders a crucial focus on corporate resources. Many of the common difficulties associated with mergers and acquisitions are a close by-product of people going off on tangents, working in the dark, for lack of well-defined goals. Employees tend to be suspicious until it is evident that the acquirer recognizes the current goals and reaffirms these in writing.
M&A Integration tip 8 –Take a decisive stand.
For many employees in an acquired firm, the acquisition is an intimidating encounter. It generates emotions of uncertainty. The natural inclination is to grow more restrained in work performance. Employees move more carefully and are less prepared to take sensible risks that would genuinely help the company.
The acquirer staff generally cultivate restraints and fuel employee anxieties inadvertently. This behavior occurs when their stance toward employees in the acquired firm is concerned, critical, or disdainful. Mergers get executives at all levels more emotional, and their vanity is easily hurt. It needs very little incitement to put them on the defensive or demotivate them.
The acquirer should take efforts to build and nurture a pleasant climate— one that is promising and positive. The integration office who will have direct communication with target representatives needs prescribed coaching on how to interact with them. The new organizational environment should be asserting rather than demanding, stimulating rather than intimidating, exciting rather than restraining. Employees in the acquisition react best when given a sense of value.
M&A Integration tip 9 –Provide employees a flag to wave.
The new employees need to integrate, absolutely merged soon. Target company’s employees require a feeling of citizenship in the new corporate structure. Low morale quickly begins when top management in the acquired firm decides to ride the fence, neither absorbing the employees nor affirming that it will run as an independent business.
Firms experience a loss of identity upon being acquired, and with that damage, there is an attrition of loyalty. Moreover, there is a loss of personal ties to upper-level managers or the founder as these people flee the scene, reducing significant personal commitments that earlier created strong motivational forces.
If the target’s prior corporate status gets removed, the acquirer has a responsibility to bring target employees in the right direction. They need to be provided a sense of the acquirer’s history and imbued with its values, norms, and corporate philosophy in a manner that does not offend the target company’s employees.
M&A Integration tip 10 –Finalize roles, responsibilities and working relationships
Shortly after the deal closure, all levels of management in the target company require a redefinition of their power, reporting relationships, and accountability. Moreover, they need a clear comprehension of the performance standards they are expected to accomplish. These measures are exerted as soon as possible after the consummation of the deal. If needed, the acquirer should forgo details for speed. The acquisition should not leave target employees working in a void.
It is usual for an acquirer to believe that it has done a competent job of communicating to people who’re in charge, who reports to whom, and the performance measures of everyone. But employees often moan about confusing lines of authority and a vague power structure. The situation produces disappointment and confused relationships. Acquirers should remember that, until these concerns are sorted out, employees cannot become wholly reconciled to the merger.