🔒Keys to a successful merger

Many small companies turn to acquisitions to stimulate growth. However, far fewer organizations actually get deals right.

One key issue they often struggle with is achieving the forecasted  revenue and cost-savings targets. This is often due to a lackluster integration process that fails to incorporate a robust 100-day plan.

To beat the odds, leaders must master both the science and art of deal-making. Here are some tips.

Ensure a balanced view of due diligence

One of the common oversights is the initial project team failing to consider voices outside the legal and financial realm.

For example, one mistake is relegating human resource’s role to a purely tactical focus, or not getting them substantially involved during the due-diligence process.

HR should provide a full suite of M&A capabilities that include: Organization structure review; talent retention; leadership assessment; manpower redeployment strategy; culture assessment and alignment; benefits and compensation practices analysis; and change management.

Effective involvement of HR reduces integration risk, such as being blindsided by costly factors that are not always visible on the balance sheet, and proactively addresses the organizational/people issues, which are the most common reasons for M&A failure.

Develop and follow a robust integration process

Once the deal is signed, accountability for driving the integration process will be passed to either executives, or an M&A integration team that manages the 100-day roll-out.

Having a cross-functional team comprised of both entities will allow for a smooth transition while maintaining an understanding of strategic intent, desired targets (synergies) and expected quick wins.

To be successful, project leaders should develop a three-part integration playbook that includes the following:

Phase I: Integration project planning — Having an overall integration plan at the conclusion of due diligence is something to strive for in every instance. During integration planning three major steps are completed:

1. Develop project governance. This includes developing common processes and templates such as risk management, issue escalation, progress reporting and escalation of key decisions that need to be made.

Make sure you have provided enough structure and have developed common processes and templates for the entire range of project-management functionality.

2. Create project structure. This entails identifying the number and type of integration teams; clarifying roles, responsibilities and decision-making authority; and developing formal charters for each team.

3. Develop/finalize integration strategy. This includes confirming/updating the financial assumptions driving the deal, developing/confirming an integration strategy, translating the strategy into an overall scorecard of measures, and cascading that down to each integration team.

Phase II: Develop 100-day plan for acquisition integration — The first thing a seasoned integration leader needs to do is to create an overall integration roadmap, which includes the major activities that occur across each of the integration teams.

The 100-day plan should focus on the specific activities and deliverables that must be completed in order for each integration team to identify and capture their assigned targets. Activities should be baked into the 100-day plan to transfer ownership of the integration to executives.  

Phase III: Stabilize and handoff to leadership team — Stabilization occurs on two levels: ensuring the acquired company achieves its business plan and ensuring the acquiring organization achieves anticipated deal synergies.

Monitoring the progress of each integration team is a function of understanding the difference between the actual vs. targeted performance.

Clarify performance objectives

Integration performance will increase dramatically if every member of an integration team is held accountable for achieving targeted results.  

A best practice is to incorporate meaningful rewards for outstanding performance and consequences for poor performance.

Ronald J. Recardo is the managing partner of The Catalyst Consulting Group LLC, a business advisory firm.