Do You Have a Post-Deal Integration Plan?
Planning for what happens after a deal is as important as preparing for the deal itself.
Investors and organizations looking to acquire businesses should prioritize integration planning the same way they prioritize target screening, due diligence, transaction structuring, valuation and deal negotiation.
Poorly planned or inadequate integration preparation can have disastrous results, including declines in productivity, employee dissatisfaction and leadership turnover. Perhaps the biggest risk is the erosion or destruction, rather than creation, of shareholder value. How would your shareholders react if they lost 50% of their investment value a year after you closed a merger or acquisition?
Harvard Business Review estimates that 70-90% of acquisitions fail. If you don’t want yours to be among them, read on to learn how you can prepare for an integration and what pitfalls to avoid.
Common integration mistakes
Across industries, here are a few of the most common integration errors we see:
- Inadequate up-front integration planning
- Lack of program leadership
- Lack of executive alignment on rationale
- Communicating the integration plan too late
- Too much time spent on organization politics
- Loss of focus on everyday operations
- Merger synergies not achieved quick enough
- Focus on customers and stakeholders limited
If you are considering a merger or acquisition, it’s imperative to think about post-deal integration planning early in the process. While performing due diligence and other buy-side preparation is crucial, it’s just as important to have a roadmap clearly outlining the appropriate steps to take after the deal documents are signed. Proper integration planning can facilitate a seamless integration designed to achieve the deal’s desired benefits.
An experienced transaction advisory professional can help guide your organization through the planning process so you can avoid common pitfalls and maximize the value of your transaction.
Post-deal integration considerations
You can significantly improve your chances of success with a post-deal integration plan that includes considerations such as:
- Change management: Employee training on new systems and processes; Internal communications about the changes; Staffing integration; Cultural integration
- Operations: Optimizing your back office; Identifying overlaps or gaps in your accounting, financial reporting and billing processes; Supply chain changes
- Technology: Integrating IT and phone systems; Resolving any data issues
You should also plan for any temporary or permanent changes in your operations and finances that may result from the merger or acquisition. For example, many business owners and investors don’t fully account for the temporary loss of revenue that may initially result from a stronger emphasis being placed on integrating IT systems, teams and processes. It may take months or even years to get the company back to a pre-merger pace, which makes it especially important to have a sound plan in place up front. As many as 60% of merged organizations report lower profitability for at least seven years post-merger, according to Korn Ferry.
Prepare to succeed with an integration plan
A strategic merger or acquisition can bring many positive changes for an organization, such as adding new service lines, deepening existing expertise, expanding geographic reach, and developing new customer relationships. However, to realize the intended benefits, you must be prepared to manage the changes (whether favorable or unfavorable) and their possible implications across the organization.
Korn Ferry estimates nearly 50% of acquired businesses are later resold at a significant loss. Do what you can to set yourself up for success.
Before entering into an M&A negotiation, you should invest time in post-deal integration planning, and consider engaging a transaction advisory professional who can provide guidance and assistance throughout all stages of the transaction. Having a strategic, effective post-deal integration plan can be the pivotal difference between a deal that succeeds and a deal that fails.
Contact me or another member of Kaufman Rossin’s Business Consulting practice to learn more about our transaction advisory services and how we can help you plan for a successful merger or acquisition with a post-deal integration plan.
Ian Goldberger, CPA, is a Business Consulting Services Principal, Transaction Advisory Services at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.