Begin post-merger integration planning far ahead of the acquisition
As mentioned above, integration isn't a discrete phase. It's an ongoing process that should predate the signing of any deal. Issues relevant to the eventual integration of the acquisition should be explored during the due diligence period.
For instance, companies should clearly and succinctly define the deal’s primary sources of value and key risks. This makes it easier to set clear priorities for integration. Carefully appraise and identify key employees, priority projects and products, potential bottlenecks, and sensitive processes.
Allow the planning process to be guided by core principles of vision and communication.
Don’t wait until the deal is done to discuss shared strategic choices and priorities for the new enterprise. Make sure expectations and goals are in alignment before moving forward. Open communication sets the stage for the harmonious integration of different cultures and management practices. A good first step is to create a communication plan during the due diligence and negotiation phases, so employees and stakeholders are informed as soon as the deal is closed.
Select a post-merger integration team
As a result of the level of interdependencies throughout an organization, M&A integration can be extremely complex, necessitating unique skills and resources that are not built into an organization's operating model. Companies can maximize the value of M&A transactions by appointing a leader with the right skills to manage complex and fast-paced integrations.
For more information, see Best practices for selecting a post-merger integration team.
Fully commit the necessary resources
Managing integration is a full-time job and should be treated as such. It should be considered a separate, full-fledged business function and handled no differently than marketing or finance. If the team doesn't have the expertise or the bandwidth for post-merger tasks, leverage the expertise of external resources to help get the job done.
Drill down to the essence of the deal
Keep the focus on the issues that will truly determine whether the integration succeeds or fails:
- Is the deal generating buy-in?
- Is the communication plan strong enough?
- Is a retention plan in place?
- Is the integration adversely affecting day-to-day business?
- Has the synergistic potential of the integration been accurately mapped out?
By answering these key questions, companies can avoid having to play catch-up during a critical transitional period.
Maintain business momentum
A successful integration should create synergies with minimal disruption to the existing business.
It starts with the CEO, who must dedicate a significant amount of time to the base business while maintaining a focus on customers. Likewise, the organization beneath the CEO should commit their time to the core business backed by clear targets and incentives to help ensure continued momentum.
Then, monitor the business closely during the integration period. Consider leading indicators such as sales and marketing pipelines, employee retention, and customer service impacts.
Treat HR as an equal
Given their critical role in the transition, human resources should be treated as a strategic partner by C-suite leadership. Not every employee responds well to the introduction of a new corporate culture. By reviewing cultural gaps during the early deal stages, and helping employees acclimate post-deal, human resources personnel can help keep morale high, while preventing talented workers from departing as a result of uncomfortable changes.
Focus on the key elements of successful integration
Successful deal integration boils down to prioritizing, detailing, and demanding accountability for synergies; efficient targeting of the right functions for integration; allocating resources to support these functions; and, of course, strong, unwavering leadership.
Business executives must commit to their synergy targets. The integration team has a role to play, but ensuring the integration stays on course requires ownership from business units and department heads.
Detail the milestones for the hand-off period (including people, capabilities, and investment) and tie them to financial impacts.
Don’t forget post-merger public records filings
It’s also important to remember that mergers and acquisitions result in fundamental changes to one or more of the constituent entities. These changes often require filings with the appropriate state, local, or federal government agencies to update their public records to reflect the changes. Filings may be required in the post-merger phase, for example:
- If the survivor or acquiror will change its name because of the merger (and the change was not reflected in the document filed to effect the merger).
- Non-survivors were qualified to do business in foreign states and must be formally withdrawn.
- The survivor or acquiror will be transacting business in states it had not transacted business in before – thus requiring foreign qualifications. Or it will stop doing business in states where it was qualified to do business, in which case it will want to withdraw from those states.
- Business licenses or DBA registrations must be obtained, amended, or cancelled.
- UCC financing statements need to be amended to indicate the acquiror or survivor as the new secured party.
- If publicly traded corporations are involved, directors, officers, and 10% owners may be required by Sec. 16(a) of the Securities Exchange Act to file Forms 3, 4, or 5 with the SEC regarding their ownership of the equity interests in the survivor or acquiror corporation.
The takeaway
By following the steps outlined above, companies will be in the best possible position to oversee a successful merger — something that corporate leaders, employees, and shareholders will applaud.
Learn more
Learn more about how CT Corporation can provide support for every stage of the deal, from due diligence to closing to on-going compliance. Contact CT Corporation today.
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