After the Acquisition, How to Make One Plus One Equal One-Plus
In the final installment of our series on the six steps toward successful mergers and acquisitions, Paul Reilly made the point that after the deal is closed, the hard work begins. We concur. Integrating your company and the one you’ve purchased into one entity will be a stiff test of your executive skills — perhaps the most demanding test you’ve ever faced. But, with strategic planning and careful execution, you can make the merger accomplish everything you envisioned when you first decided to pursue it.
It may seem almost too obvious to mention, but you can’t pull off the feat of bringing two companies together if you can’t afford to do it. Buyers who have spent all of their money on the purchase price may not have the resources to fund the incidental expenses of integration.
You may, for example, have to pay redundant salaries until the headcount is optimized. There may be rent to pay, for the time being, on the acquired plant. Covering these financial contingencies has to be a part of the plan. It should be considered before the closing at the time the structure of the purchase transaction is negotiated.
That said, the main ingredient of a successful integration is communicating how it will work and why it is a beneficial thing to do. This is often best carried out by someone the buyer appoints to lead the transition: a trusted manager who has the people skills to align everyone behind the plan and the organizational ability to set and achieve its milestones.
Communication should take place in stages, with customers briefed first and employees and vendors brought up to date in turn. Why prioritize customers? Because there’s never a guarantee that they will stay on following a merger. They’ll have questions about jobs in progress and, above all, the kinds of prices they can expect going forward.
That’s why it’s vital to meet with the key accounts just prior to closing or immediately after it is announced. The former owner should be on hand for these meetings with the buyer to make sure that the concerns of the entire client base are identified and addressed. Don’t wait for the rumor mill to turn customers’ anxieties into pretexts for leaving you.
Effecting an integration means selling a value proposition to everyone with a stake in its outcome. Employees’ stakes are their jobs, and their first reaction to rumors may be to fear the worst. If they aren’t brought fully into the picture, they could act on those fears. We have seen cases where jittery workers have contacted local media about what has happened — a distraction that no buyer trying to orchestrate an integration needs.
The prudent move is to break the news to department heads first. They are the people to whom the rest of the staff will turn to for information, so it’s essential that they have a clear picture of what the integration is going to mean for the folks on the production floor.
Be as up front as you can about future staffing levels. If it looks like the headcount is going to be reduced, you should be prepared to say that reductions are a possibility. Then, you will have some decisions to make about eliminating overlapping or unnecessary positions.
Remember, this cuts both ways. The company you acquired may have people in certain jobs who are better qualified for them than the people you employ in similar positions. This means that you have to keep an open mind about retention, focusing not on personalities but on the skill sets you need to be successful. The same applies to the post-merger sales force. No matter which side of the house they originally came from, you can’t afford to retain sales reps who aren’t making their numbers.
Selling a value proposition to the workforce is about more than job security. Your company and the acquired firm may have different operating styles: “top down” and centralized versus open and participative. Everyone needs to know how he or she will be expected to perform under the merged management structure. If the acquired company is based in a different part of the country than the buyer, there may be regional differences of style to harmonize as well.
Vendors, especially preferred ones, need to be kept in the loop and out of the rumor mill. What you pay for paper and other consumables may not be the same as what the seller was paying. If the difference is great enough to mean that contracts with suppliers will have to be renegotiated, the sooner this is on the table, the better.
While we recommend candid communication with all concerned, there are certain pieces of information that should never be disclosed to anyone. If, for example, the selling company was in financial distress at the time it was acquired, that fact needn’t go beyond the key members of the transition team who are working to fix the problem.
The success of an integration comes from the detail and the discipline of the plan that steers it. A roadmap for the first year of the merger should include specific goals and action plans with timelines for engaging customers and other key constituents. If staffing reductions seem likely, employee evaluations should be among the events scheduled for the first year.
The general objective is to create a whole greater than the sum of the parts: a leaner, more competitive organization that represents the best of both companies. After a year, revenue should have increased and the expenses of the combined operation should have gone down. The good results will be evident in a more robust bottom line.
Now you can share these success points with the people who helped you earn them. Reward your employees with small but meaningful perks like a first-anniversary party or an extra half day off. Let them know that their contributions are important and that their loyalty is valued. Look confidently to the future knowing that thanks to the hard work of integration, the base on which your business stands is stronger than ever.
In his role at New Direction Partners, Randy Camp is dedicated to bringing buyers and sellers together for profitable transactions that benefit both parties and strengthen the overall industry. He is the former CEO of a family-owned printing business and a past president of the Printing & Imaging Association of Georgia (PIAG), an affiliate of Printing Industries of America. Camp has volunteered extensively in the printing industry and has accumulated a wealth of knowledge about its inner workings, as well as a large base of contacts. Contact him at (610) 230-0635, ext. 708, or at firstname.lastname@example.org.