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The Art of M & A Integration

by Dr. Linda Henman

We’ve all heard the doom and gloom statistics about mergers and acquisition. Even those that don’t move the financials to the wrong side of zero often fail to delight shareholders and stakeholders. Poor evaluation procedures take part of the blame—but only part. A failure to carefully plan for the integration has some culpability too. In the heat of finalizing the deal, integration is often left until the last minute or ignored entirely. To avoid the traps of integration, start by analyzing the Five Essential Traits for Successful M & A: vision, financial synergy, operations, talent, and culture.

Score this deal from 1 to 4 for each of the statements below

Rank each on a scale of 1 to 4
1=Totally Disagree, 2=Disagree, 3=Agree, 4= Totally Agree

Vision

1. We have established a timeline for critical changes.

2. We have decided how to integrate our brands.

3. We have committed to a clear mission.

4. We have a strong communication strategy for integration objectives.

5.  We have a post-merger integration plan based on the investment thesis.

Financial Synergy

1. We have accurately valued the combined tangible and intangible assets.

2. We have established key interim measures of success.

3.  We have met the financial criteria set by our investors.

4. We have stress-tested our view of their financial situation.

5. We have made key decisions about the integration of financial systems.

Operations

1.  We are able to track customer happiness in real time.

2.  Relationships with key suppliers have been secured.

3. We have comprehensive, enterprise-wide IT system capability to replace multiple legacy systems.

4. We have a plan to integrate sales and marketing to fuel growth.

5. We have calibrated speed, giving consideration to possible disruptions.

Talent

1.  We have selected the best person for each key role.

2.  Each key player has agreed to a compensation / benefit package.

3.  Functional leaders are in place.

4.  We have clear lines of accountability for each function.

5. We have developed a succession plan for key positions.

Culture

1. We communicated the type of organizational culture needed to fuel success.

2. We have described the specific behaviors people will need to exhibit to succeed in the new culture.

3. Leaders make our values more credible through their behavior.

4. We have a code of conduct for the new organization.

5. Reporting structures are in place

90-100 Escape Velocity

Congratulations! You have a clear mission, a vision for the future, and a rational plan

80-89 Thrilling Ride

You have a number of things in place, but you may be tempted to let the thrill of the ride override your good judgment. You are far better off challenging yourself now than wishing you had done so later.

70-79 Unclear Direction

You need to devise a plan and implement it immediately.  Otherwise, your well-laid plans during the due diligence will quickly turn to disaster.  The energy and focus that you will need to keep this on course is minimal compared to the losses that will accumulate if things go badly

Below 70 Implosion

Only direct and immediate action will avert the disaster. Whether you’re about to do a deal or have just closed on one, you are in imminent and certain danger of taking this deal to the wrong side of zero.

Conclusion

No matter what the facts tell you, don’t assume the sanctity of all integration. Consider emotion too—yours, your employees’, and your customers’. Who in Chicago will soon forget Macy’s demanding the name change of Marshall Field’s in 2006, compromising a brand name that has stood for excellence in Chicago since 1881? Too often the acquiring company insists on improving things, replacing things, and renaming things that didn’t need to change in the first place.  Marshall Field’s could have retained its name, brand, and loyal customers were it not for the wrong-minded attempts at corporate Macy’s.

The parent will have to make numerous unpopular integration decisions, but none has to be demoralizing. If you found the company worth buying in the first place, it’s probably worth trusting, funding, and encouraging it to thrive without unnecessary interference.

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