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Assembling the Right Transaction Team

A Successful (Corporate) Marriage Requires a Plan

Most companies have a financial plan by month.  Some companies plan their cash receipts and expenditures weekly.  Other companies plan their sales and marketing down to the day, or even the time of day.  Why is it then, that some of these same companies that plan every detail of their business on a regular basis fail to plan one of the largest endeavors that a company can undertake, the integration of a merger or acquisition?

The realities of corporate marriages

Most CEOs involved in a merger or acquisition rank integration [pdf] issues as one of their greatest concerns, and with due cause. Data shows us that corporate marriages fail over 50% of the time, with some quoting rates as high as 70-90% of the time. This high failure rate only reinforces the need for a detailed integration plan and the appropriate resources to execute it.

I have heard many reasons why a company does not have a plan for integration. My favorites include, “There are too many unknowns” or “I have opened/closed several stores/offices/plants/etc. before, so I know what to do.” Are there any more unknowns in an integration than putting together a sales plan for 18 months out? Are there any more unknowns than when building a marketing plan using a new marketing campaign? Just like any plan that is built with unknowns, one has to be flexible and modify the plan accordingly as more information becomes available. And, while an integration is similar in some aspects to opening and closing other locations, it is not the same. It is almost a combination of the two: opening the new entity within the current organization, while closing down the prior, old organization. To compound things further, throw in one of the most complex aspects of integration, combining two corporate cultures, on top of that.

The clarity from a carefully crafted plan helps provide focus and direction. In my opinion, the following questions must be addressed in the process of creating a successful integration plan:

Goals of a Corporate Integration Plan

For argument’s sake, let’s assume that a company did its due diligence upfront and knows that the target company is the right entity to merge with or acquire. The next step is to define the goal of the transaction. Is this an acquisition for the technology? For the people (acqui-hire)? A complimentary product line/service that will share some expenses? Or a completely standalone division that will operate independently? This will help determine the level of complexity of the plan and which parties will need to be involved. It will also ensure that everyone within the organization is focused on the same objective.

What needs to be done?
As with many projects, there will be a lot of unknown issues in the beginning. The company will not necessarily have all of the details regarding the scope and timing of the tasks necessary to complete the integration. Start out by holding regular meetings with key stakeholders, since decisions by one group may unknowingly affect others. The team should meet often — at least weekly to begin with and possibly daily as the transaction date approaches. Brainstorm a list of the necessary tasks that need to be completed and bucket them into topics (e.g., finance, HR, communications, operations, etc.). Consider the list a work in progress. People will continue to think of tasks that will need to be performed during the integration, and new information will be collected that will need to be bucketed accordingly. Remember that no point is too small. When dealing with the multiple, complex parts of an integration, items that are second nature in the current business can easily be forgotten.

When do the tasks need to be accomplished?
The first 100 days of an integration are critical. This is the most complex portion where a majority of the nuts and bolts of the integration take place (i.e., getting payroll setup, providing systems access to those who need it). This also sets the foundation for the rest of the plan, so special attention needs to be paid to it. As such, a separate, detailed 100-day plan is a good idea in order to focus on and streamline all of the necessary moving parts.

Start out by grouping the bucketed tasks into general time frames (i.e., pre-close, first day, first 25 days, 25-50 days, etc.); then, organize them based on priority and add specific dates of completion in order to create a detailed time and action plan for the integration. Beyond the first 100 days, detail out a plan for integration with key milestones, regular KPIs, and critical dates to ensure that the plan execution is continued once the initial dust settles after the transaction is completed.

Who is responsible?
Obviously, the key executives need to be involved in deciding what is to be done and when; however, they also have another business to run. I have witnessed how the current business can suffer as a result of the transaction, distracting key personnel from their daily activities. As such, as soon as it is decided to pursue the deal, the company should hire a project manager and give the manager the necessary authority to successfully complete the integration plan. This should not be the CEO or other key company personnel. It should be a trusted advisor, or even an independent third party. The latter is sometimes the better choice, as they bring a fresh perspective to the transaction and are unencumbered by internal politics.

There are always going to be unknowns that come up in the process of a merger or acquisition. Either something was not known before it needed to be executed, or it is not something that can be effectively planned, such as the merging of different corporate cultures. However, that does not mean that an integration plan should not be created. By going through the process and having the right people involved throughout it will minimize those unknowns. Without a comprehensive integration plan, there is very little chance of executing an efficient integration, which will ultimately determine whether the corporate marriage succeeds or fails.

 

Michael Wesley is Managing Director, Clear Thinking Group

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