5 Best Practices for Integrating After a Merger
During a merger and acquisition, many things change in corporate environments. Here are the 5 best practices for surviving and thriving in a company merger.
The close of an M&A deal is a time to celebrate—and it’s also the start of another significant process: integrating two organizations. This is where the optimism that drove the acquisition meets reality and often challenges. Fortunately, understanding that this part of the process requires attention and thoughtful strategy is the first step toward avoiding integration obstacles.
By establishing plans for leadership, communication and cultural integration early, and then managing the process actively throughout, you can create a more seamless merger and sidestep some of the common pitfalls.
Follow these best practices for a successful post-acquisition integration:
1. Focus on Leadership
Before you can roll out a large-scale change to any organization, you’ll need to establish the process leaders. This may seem obvious, but a lack of leadership support and alignment are some of the top reasons that many integrations fail. At the start of the process, identify the leadership team tasked with facilitating the integration effort. There’s no right answer for who exactly should be on this team, but it's important to include people from both organizations. You should also elevate people who are enthusiastic about the next stage and committed to making it a success.
Once you’ve identified who will lead the charge, you want to prepare them for the task. Assess their capabilities and skills when it comes to managing change, bringing groups together, communicating goals, and identifying strategic pain points. Then provide support and training to the leadership team first. Bolster any skills gaps that arise, and ensure everyone is aligned regarding the vision of the new organization.
2. Prioritize Culture
Merging two organizations is no small feat. The leadership team will need to review two sets of operations, processes, financials and more and then determine the best way to incorporate the acquired company into the new joint organization. However, amidst all this technical work, don’t forget to focus on integrating company culture. No two companies are alike, and even if you’ve deemed your acquisition a great fit during the diligence process, you’ll still need to address how that fit will occur.
Begin by evaluating the culture of each organization. You want to understand what’s similar and what’s dramatically different. Then work with the leadership team to determine what the new culture will look like—establish shared values, discuss management style across the new organization, employee expectations, communication processes, engagement, and even innovation. And finally, be mindful that the acquired organization may have processes that could improve the larger organization. Not all the change has to flow in one direction; instead, aim to create a new entity in which the sum is greater than the parts.
3. Dedicate Resources
One of the biggest mistakes that companies make post-acquisition is a lack of dedicated resources specifically to the integration process, especially the cultural aspect, in addition to the operations. Establish an integration team that includes both leaders and contributors from each component of the new organization. That may entail human resources, finance, operations, sales, marketing, product development and more.
Set aside a budget and dedicated time to create an integration strategy, establish communication protocols, and train the leadership and the rest of the staff. Research by consulting firm EY estimates that integration expenses will cost about 1% to 7% of the deal size, so you want to plan accordingly.
4. Communicate Early and Often
Ideally, your company has prioritized communication throughout the deal negotiations and close. As the two organizations merge, communication becomes even more critical. McKinsey deemed merger communication the “glue that holds everything together.” The firm advises that beginning on the very first day of the merger, you should communicate to employees what will change and what will remain the same.
Providing vital but straightforward information—such as who employees report to and whether the leadership will change—goes a long way toward easing employees' minds and smoothing out the transition. Your strategic communication plan should not only address employees but also other key stakeholders, including vendors and customers. Develop key messages that address each group’s concerns preemptively and create a plan for disseminating the information and fielding questions.
5. Actively Manage the Process
Most integration advisors say that companies have about 90 to 100 days after the deal closes to complete an integration. Much longer, and the process can go a little sideways. Systems get duplicated. Silos arise. Employees that were expecting and ready for change go back to their old ways. And initiating any integration after the fact becomes that much harder and potentially more expensive.
Instead, implement your integration process as soon as possible and then manage it actively throughout those first critical three months. Establish goals and metrics that you want to achieve and a timeline for doing so. Check-in on your progress toward the integration goals frequently, and reassess as often as needed. Indeed, you may need to adjust the plan as unexpected issues arise. But overall planning for the change and then managing it consistently toward an end ensures business continuity and minimal disruption for employees and customers.
Merging two organizations is a significant undertaking. Keep these best practices in mind and you'll create a process that gleans the best of both companies.