Hard Lessons in Mergers & Acquisitions: 5 Integration Don’ts

Our best advice for mergers & acquisitions (M&A) integrations: Don’t skimp on planning.

Companies often either wait too long to begin planning or they try to plan too far. Those who make too many assumptions and decisions will have to significantly readjust their plan after the deal is done and they learn more about the acquired company.

Integrated Project Management Co. (IPM) recently worked with a food manufacturer that acquired a division of another company, its first. The definitive agreement was communicated and celebrated, but with their focus on finalizing the deal, it wasn’t until a week before close that the executive team could think about the next step. Recognizing the work and planning involved with the upcoming integration, they reached out for help. Instead of executing a well prepared integration plan, IPM helped the team triage the situation and align the organization on the most critical activities.

If you’re tasked with leading the integration of a new acquisition, scrambling to close a TSA, or looking back to learn from an integration gone awry, we present these five M&A integration planning don’ts.

1. Don’t go shopping without a solid business strategy

Don’t go shopping without a solid business strategy behind the deal or if you’re not equipped to handle an integration. We’ve seen instances where a private equity parent or enthusiastic CEO saw an opportunistic buy and snapped it up quickly. With the food manufacturer example above, its PE owner drove the acquisition without considering whether the company’s business processes and systems were stable enough to absorb it.

Before bidding on another company, ensure the organization has time to plan, prioritize, and resource the work to execute a smooth integration. And define the long-term objective of the acquisition both to validate that it’s the correct strategic decision and to help secure buy-in among the different stakeholders.

2. Don’t wait to start the integration plan

Don’t wait until the deal is finalized before starting the integration plan. Start early so you have time to identify what has to be done and who’s going to do it. Mobilize a small integration team about 30 days prior to reaching a definitive agreement. By the time the agreement is announced to shareholders and the FTC, the integration team will have a rough plan that enables them to answer questions, communicate effectively, and avoid confusion and apprehension within the organization.

On the other hand, don’t jump the gun and make major organization or business model decisions, because you learn a lot about the acquired business after the deal closes. Some M&A consultants stress speed and push to “hit the ground running” on day one—including publicly naming executive leadership—before closing. In our experience, that’s a mistake. First, if the acquirer controls all the decision-making, it can set up an “us vs. them” perception among the acquired company. Also, it’s impossible to know everything about the acquired company until after the deal closes.

There is also the risk that the close date will be delayed or that the deal will fall apart. We saw this firsthand with a client that announced major organizational changes before the deal was finalized. Closing was significantly delayed before the acquisition fell apart entirely. Managers who had been promoted to new roles were in limbo. Employees who felt overlooked became disgruntled, and some left for new jobs. The devil is in the details and without knowing the details, everything looks easy. Setting arbitrary deadlines on high-level information and assumptions leads to missed executive expectations about synergies, implementation costs, effort levels, and timelines.

3. Don’t assume similarities

Don’t assume two similar businesses have similar processes, culture, data, etc. At 30,000 feet, two organizations can look a lot alike. But until you have visibility into the inner workings, you have no idea how another company operates. Similarly, don’t assume you as the acquiring company have the better structure, processes or systems—you have an opportunity to see and learn from the effective operation of another organization firsthand.

This is a common misstep larger companies make when acquiring smaller companies. The executive team on one of our engagements started down this path in a desire to quickly migrate a newly acquired company onto their ERP system. After mapping out the acquired company’s processes, we discovered some significant differences and were able to convince them they needed to address the variances first. Failing to do so would have caused a major customer disruption. Bottom line, an integration will be more likely to succeed if all the parties have the right level of information, input, and engagement.

4. Don’t communicate what isn’t confirmed

Don’t communicate what isn’t confirmed. For example, don’t announce changes to organizational structure or priorities before the deal is closed. Closing dates move, executives accept jobs elsewhere, and markets respond. And, again, company peculiarities will be revealed. It’s important to have a communication plan in place to share news often and at the appropriate times as part of proactive change management. IPM worked with a CPG company whose integration office announced decisions, but the executive team changed the strategy and was informally communicating something different. Both organizations were confused and anxious.

Remember that communication isn’t all about memos and townhall meetings. People can see who is in whose office and will speculate. It’s been said that communication is less about the words you say than the action you take. Be as transparent, honest, and empathetic as possible. Keep in mind that customers will also need to be informed to maintain their confidence and avoid losing their business.

5. Don’t overlook basic operations

Don’t focus so much on the long-term benefits that you overlook basic operations. There are surely long-term strategic benefits to the acquisition, and you need to keep those in mind. However, in the first period after the deal closes, a well-defined plan will focus on the activities that will avoid business disruption.

A hospital system shared that their integration plan overlooked many important day-to-day operations activities, leading to disruption that put the system into an all hands-on-deck crisis. Whether they are patients, consumers, or other businesses, customers should not be impacted during an integration. Once you put the foundation in place and the business is stable, you’ll be in a better place to capitalize on the synergies and other benefits of the combined organization.

Scott Grzesiak, Executive Vice President of Strategic Growth
Integrated Project Management Company, Inc.

Contact one of our M&A experts to discuss the execution of your merger, acquisition, and/or integration.

Services: Mergers & Acquisitions
Industries: Life Sciences | Healthcare | Consumer Products | Industrial Products