You have bought the business. Now the challenging part starts. How you can accelerate your integration in quick, easy steps.
Acquisitions tend to follow a fast pace, with excitement, adrenalin, and enthusiasm about the future. The reality however is often different.
According to a recent Harvard Business Review report, the failure rate for integration of businesses following mergers and acquisitions is between 70 percent and 90%. Forbes places the failure rate at 83%.
Our work together with leading companies over the past 20 years shows there are four concrete steps you can take towards better integration.
Determine the team dedicated for the project, and make this their full time responsibility. One person can be named “President of Integration”.
Their incentive program and work success should be based on the outcomes and KPI of the integration program. Verify with everyone involved their role, their responsibilities, and expectations.
The biggest error I have seen is to assume people in their day-to-day responsibilities have time for integration. They do not.
You have spent a large amount of time, money, and other resources to make this acquisition happen. Do not let it become part of the 90% failures.
Communicate your expectations about the future clearly. For example:
(i) What brands will be used following the closing? For how long? I have worked with companies that keep all brands separate with their own unique identities. Others decide to immediately make a branding switch. The decisions should be clearly communicated by country, customer segment, and product line, as to what will happen and when.
(ii) What is the message to customers? How do we predict they will realistically react? How will we know, and when?
(iii) What are the Dys-synergies of this transaction? What will be the negative impacts? Do not hide this. Everyone knows already that certain customers may not be happy, so communicate what will happen, and what you plan to do about it.
(iv) What functions will be integrated, and in what time frames? For example, do you plan to move to one IT system? What will it mean? Will legal functional offices be consolidated by country or territory? When and by whom?
(v) Which facilities will you keep? People begin wondering immediately if their jobs are at risk or if they must relocate. You risk losing the best talent by not being upfront about this. Make a plan of which plants, offices, research facilities will stay.
(vi) Highlight the key talent you need to keep and create an HR plan for retention and promotion. When you bought the company, normally a large part of the value creation is through the people. How will the key people be retained? Communicate this throughout the appropriate channels.
(vii) Make sure that everyone knows this will not be easy. Be up front about failures. One of the biggest reasons for integration failure is a result of people being afraid to speak the truth. What is actually happening? What are customers saying? What did we make a mistake about? How will we change?
Keep your board involved. A good board have collectively hundreds of years of integration expertise. Leverage this knowledge. Schedule the relevant time in each board meeting to review how your strategy and integration plans are working relative to your initial predictions.
Remind everyone of the 90% failure rate. The goal is to identify the risks and take preventative actions. This is also a golden opportunity to shift strategy from a static document to a dynamic series of decisions to be taken.
Acknowledging that integration is a fluid set of activities, driven by a structured process, leading to desired outcomes, will accelerate quality decision making.
Look for the unexpected good news and capitalise on it.
Your business case and integration planning identified a number of potential synergies, and ways to better serve your customers. As you perform the activities of integrating the businesses, new customer needs will be uncovered. You will find you have improved capabilities to fill needs that were previously difficult, expensive, or impossible to respond to.
As an example, we worked with a company that are world leaders in the plastics industries. Following an acquisition, they identified a series of patents and production processes that could be adjusted to fill a long-term customer need.
The customers for years had been looking for a better solution and had not found one. This simple repurposing enabled the acquiring company to more than double the original expected business case performance, providing an excellent ROIC rate and delighted customers.
Integration does not have to fail.
The four steps you can take for better returns are:
- Appoint the team, and keep their incentives 100% aligned with the success of the integration project
- Communicate clearly, and ensure information good and bad is flowing both ways
- Keep your board involved and acknowledge that the strategy is dynamic not static. This means the board must take faster decisions.
- Search for the unexpected good news and new business, and capitalise on it quickly