Unless you have completed an acquisition or been part of one as an integration team, it’s hard to appreciate the work it takes to make a transition successful. Since many of our readers are “sellers,” I thought it might be interesting to take a look at the M&A process from a buyer’s perspective, specifically analyzing the steps that are key in order to improve the odds of post-merger integration success.
Recently, HR services provider Insperity published an article that took a look at a several strategic steps that buyers should take to help improve an acquisition’s odds. It was entitled “Preparing for a Merger or Acquisition? Here’s What You Can’t Afford to Ignore” and provides great insights on how to prepare your company for an acquisition.
Nearly every client that we work with expresses the importance of his or her business’s post-acquisition legacy. In fact, in many cases, this becomes (along with the relationship of the key employees with the new owners) one of the most important issues clients evaluate during due diligence. The legacy of the business becomes intertwined with the persona of the owner to the extent that post-acquisition success often becomes critical even if the seller departs immediately. This is how Insperity describes the issue:
Mergers and acquisitions can fail for a variety of reasons, but two you can’t afford to ignore are poor culture fit and human capital issues … [Fortunately] there are things that you can do to help prevent your company from becoming an M&A statistic.
Based on our experience, post-merger integration success begins long before the deal closes. In fact, if you wait to consider and plan for the integration of your company until the final check clears, you will almost ensure that your company will have a tough transition under new ownership. One of the first steps you need to take is to assess the culture of your business in conjunction with that of the acquirer’s, says Inspertiy:
Successful mergers often are ones where the companies’ cultures and values are similar.
While every business will have its own company culture, this is one area that will make a difference if you can get a close match to your acquiring company. And if it’s not a match, is one company or the other willing to change to make things better?
The answer to the latter question, based on what we have seen over the years, is often no. Or, in reality, even if the desire to adopt a different set of values is there, it can often be a tough transition, even with the best of intentions. Since no two cultures are identical, and since a company’s culture is largely driven by the personality and spirit of the founder, communication is vital post-acquisition. And the earlier you can start this process the better.
The reality is that because confidentiality is paramount for most private company transactions, communicating to your employees/customers/suppliers about the pending merger or acquisition may be nearly impossible. However, the sooner you can meet, at a minimum, with your key employees, the better the odds of success are. Here are some items to look at as you create your communication plan:
Depending on your company’s culture, the sooner you begin communicating to key players regarding the pending acquisition the better. This has to be handled carefully, again, because of confidentiality. Only you can decide, in conjunction with the buyer, how to design your communication plan. The “how” and the “when” of the plan are the most important facets to analyze.
One of the most interesting dynamics that we have seen is that sometimes the simplest issues are the ones that are too often not covered in a transition communication plan. For example, the primary question most employees have is this: Who will I report to after the transaction closes?
Insperity has some excellent ideas about this:
One of the biggest reasons mergers and acquisitions fail is due to poor change management. As a result, how you interact with employees and manage the change process can be the difference between success and failure as you merge two organizations…
What will the organization chart of the combined organizations look like?Determine job titles and the reporting hierarchy.
As we all know, humans abhor change. Most will put up with a great deal of grief before enacting change in their personal lives; change at work can be even more intimidating. Quite simply, as the old saying goes, in the absence of information, rumors will fill the void. Nothing can endanger post-close success more than the good old rumor mill. The sooner you can get in front of the discussions at the water cooler and manage what is being heard and said, the better the transition will be.
The good news is that post-transaction success can be achieved if you are willing to take the time with the buyer and plan the steps involved. To not do so will almost surely spell disaster.
And don’t think that just because the new owner is retaining you for a couple of years that your presence will automatically smooth and speed the transition. What we have found is that invariably employees will start coming to you with common refrains: “But Larry, you wouldn’t have made that decision” or “Not sure about that one boss.” This is where your ego can get in the way and really impact the new company quickly!
Bottom line: It is always better to manage any change process but especially when it comes to people’s jobs and financial futures. Be sure to carefully plan how the new organization will be structured and what changes need to be made post-acquisition to make this a reality. And most importantly, decide with the buyer when and how to communicate the deal to your employees, suppliers, clients, and community.
To learn more about this vital concept, read the Insperity article: Preparing for a Merger or Acquisition? Here’s What You Can’t Afford to Ignore.
And to expand your knowledge base on this topic even further, I suggest attending one of our exit planning conferences to all business owners. There you will be able to learn all facets of post-transaction success. If you are interested, please contact me at 972-232-1125 or email me at email@example.com and I will put you in touch with one of our M&A advisors.
Carl Doerksen is the Director of Corporate Development at Generational Equity, part of the Generational Group.
The information we learn from customers helps us personalize and continually improve your experience at gencm.com. Here are the types of information we gather.
Information You Give Us: We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice. Our computer system protects personal information using advanced firewall technology.
Information from Other Sources: For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Capital Markets LLC may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Capital Markets, L.L.C. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Capital Markets LLC at is office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
INFORMATION ON THIS WEB SITE IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT. SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOT APPLY TO YOU.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Capital Markets may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Capital Markets does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Capital Markets will be deemed NOT to be confidential. By sending Generational Capital Markets any information or material, you grant Generational Capital Markets an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Capital Markets is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Information Generational Capital Markets publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Capital Markets intends to announce such products, programs or services in your country. Consult a Generational Capital Markets representative for information regarding the products, programs and services which may be available to you.
Generational Capital Markets makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Capital Markets web site, please understand that it is independent from Generational Capital Markets, and that Generational Capital Markets has no control over the content on that web site. In addition, a link to a non-Generational Capital Markets web site does not mean that Generational Capital Markets endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Capital Markets BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Capital Markets.
Honored to win Investment Banking Firm of the Year 3 years running.
Over 50 awards and counting.
Sign up to receive regular email updates, industry-leading insights and details on complimentary M&A executive conferences in your area from our award-winning team
Success, you have been added to our list.