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Fight Deal Hangover for Successful M&A

by on October 10, 2013

IntegrationIntegration in the M&A process is always the last thing any executive thinks about.  The chase for the company is exciting.  Being “in the know” is sexy.  But once the deal is closed everyone wants to walk away from the deal and get back to their day jobs and forget about integration. but once the deal closes is when the REAL work begins.  That’s when the heavy lifting happens.  But it should not be when it begins.

Executive Engagement

The biggest point of failure in most M&A deals is the lack of executive engagement in the integration process.  This is highlighted by me in an earlier post, Cross Border M&A and the Difference between VCs in the US and Europe.  In that post, Frank Berzau, and expert in M&A in Europe, states, “Sustaining efforts to successfully integrate an acquired company into the organization requires a long lasting executive focus. Many executives act like the deal is done when the contracts are signed. They give a great deal of focus to getting the deal done.  The truth is that this is when the real work begins. It needs significant executive attention in order to be successful. “

Deal Hangover

The thing is that there is a natural “Deal Hangover” that occurs when the deal closes, especially if you do only a few and don’t have a department that does nothing but M&A deals for you.  That means most companies.  The Deal Hangover happens because it takes a lot of effort and attention to even get to the closing.  It’s stressful.  You can’t talk to people about the work you’re doing.  It requires extra work on top of you’re already loaded schedule.  It requires coordination with a lot of different departments and working with the Board.  During the process you are eagerly awaiting the end, pushing to get a successful conclusion to all of the work you’ve put in.

And when that end happens, after the deal is signed, the money is transferred, the announcements made, and the questions addressed, all you want to do is rest.

But you can’t.

All of the employees that weren’t a part of the acquisition team, from both sides, now ask one question, the same first question, “What does it mean to me?”  And you have to have an answer, even it means you have to say I don’t know (although that’s a bad answer).  That answer isn’t made up when the deal closes.

It is formulated soon after you begin the Due Diligence.

Integration Begins in Due Diligence

That’s right, integration planning begins at the beginning of the due diligence process.  It becomes a part of the assessment and analysis made when looking at the various departments and assets of the target company.  It becomes a part of the thought process, “How do we fit this company and these people into our company so that we are better together?”

3 Phases to Integration

There are essentially Three Phases to the Integration Process:

  1. Pre-Closing Planning
  2. Transition
  3. Reengineering

These are depicted in the picture below:

Integration Phases

It’s About the People

If a deal has been misconceived, no degree of brilliant postmerger integration will clean up the mess. And even if a deal has been well thought out, the participants can stumble. Many key operational decisions must be made in the months following an announcement, but it is easy to get caught up in the excitement and demands of deal making and to fail to think clearly about what comes after. CEOs are under pressure from shareholders, boards, and often the investment community to justify their strategies.

While plenty of attention is paid to the legal and financial side of deals, they stand or fall on the strength of their human side. When, as today, a company’s highest return ratio is the “return on talent,” the company must ensure that it still has the people it wants when the smoke clears.

As an example, we had completed a deal and integration was underway.  We were definitely in the early stages of the Transition phase, as depicted above.  It was a delicate time.  Everyone is wondering, “what about me?”.  We had plans in place and we were moving forward when an unfortunate incident occurred.  A member of the acquiring team handled the termination of a team of the acquired company very poorly.  All of the work we had done, all of the good will we had created, was destroyed in a matter of minutes by someone acting impulsively.  I had to work really hard at damage control.  But it could have been avoided.  This individual who acted improperly should have been more focused on the human side of their interaction. Instead he was focused on completing a task.

Summary

Focus on the people and fight the Deal Hangover.  It’s imperative to your employees and the success of your company that you do.

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