Discussion around success and failure in Mergers & Acquisitions tends to emphasise the technicalities of the deal itself, with little focus upon the practicalities of delivering upon the promises it makes. The big numbers involved in deal making often distract; not enough focus is placed upon the requirements needed to execute the integration post deal, deliver synergies or benefits, and protect the Business As Usual operations of both the acquirer and the target.
The period between agreeing the deal and taking ownership of the target organisation, usually referred to as Day One, is critical. A huge amount of concurrent activity needs to be undertaken within a compressed timescale to kick-start integration. This phase, lasting just a few months, is essential to ensure that both the business and the integration are carefully managed over this transitional period. There are Six Golden Rules that should be applied to any transaction to greatly increase the chances of success.
1. Focus on the essentials
Clearly, an overarching vision for the combined business, fed by the terms and ambition of the deal itself, will be needed. Translating this into specific actions, programmes and initiatives takes time. Of immediate concern is the identification of critical activities that need to be achieved to support deal completion. These need be agreed, planned and resourced effectively. Focus must be placed on the things that really matter. All other work can be left until after Day One.
So what are the critical activities? The answer will depend upon the context, but start by looking at each business function and working with key stakeholders (Directors, Functional Heads, etc.) to list the actions that absolutely must be undertaken for the business to function effectively. Customers may not mind if in the near term their invoices carry an old logo. But they will care if they can't buy the products and services they depend on. A good sense check is to ask whether there is a legal, compliance or impact-to-BAU issue regarding a proposed change. If not, it can wait.
2. Treat the integration as a defined programme
The integration needs to be treated as a planned programme of related activity, and this should be planned as early and as thoroughly as possible - preferably before the closing of the deal.
Within this programme, Day One will require strong and distinct governance during the transitional period. This is designed to manage the organisation to Day One. Empower a team to execute the pre-Day One activities apportioning responsibility for critical activity to specific individuals. Each member should undertake planning using extensive readiness checklists for each function to identify the key changes required. Without this structure and approach, paralysis or confusion is all too easily created.
3. Engage stakeholders within the organisation
Share as much information as is possible. People will be apprehensive in the absence of communication, which will impact performance. Be upfront about the vision for the combined organisations. If you help everyone understand why you are doing this, you can expect their commitment to the cause or identify who might block your progress. Create transparency for the workforce and customers about the situation.
Be sensitive to the different working cultures and values. Communication can help employees make personal transitions as the new organisation emerges. Avoid triumphalism; you will have to be working with this team in the near future. Finally, ensure that the best resources are quickly identified on both sides of the transaction, and put plans in place to increase their confidence and commitment in the business to ensure they are retained.
4. Engage specialists, early on
Embarking on an integration is an exciting, but complex and time consuming, prospect. Defined processes must be followed and critical observed. Without an internal M&A function, and given the levels of expenditure involved, it is prudent to invest in the best advice available. Experienced independent experts can focus on identification and formalising of benefits, delivery of these and the realisation of the synergies required for long-term success. Others can concentrate on day-to-day business.
5. Appoint an Integration Director
This role is a powerful one, there to neutralise hostility and internal/cross-organisation politics by defining the period of engagement early together with an exit strategy. They also make tough decisions, and will need full sponsorship at the most senior level to do so. Performing the role is impossible on a part-time basis. If you do recruit internally make the role full time and ensure previous responsibilities are delegated.
If possible, appoint this person into the deal team so they fully understand the rationale, the benefits and the key risks before integration starts. They can then help shape the transaction itself.
6. Protect Business As Usual (BAU) operations
BAU must not be interrupted in either organisation in this period. Critical day-to-day services within the business should be identified and ongoing checks made to ensure that standards are maintained.
While the temptation is often to task the best managers and leaders in the business with driving critical change this creates a risk that BAU may be interrupted. Experts in change should be focused on critical activity, rather than those who are expert in delivering day-to-day operations.
In reality, the work is only just beginning; total integration may take years. Rather than being daunted by the task, creating an agile portfolio of change initiatives to support integration will ensure resource can be managed, and the organisation is not overwhelmed by too much change all at once. After Day One, the focus must look towards managing and delivering the long-term benefits and synergies agreed in the deal. More attention needs to be given to the practicalities of this and getting to Day One. This brief window sets the tone for the complex and longer-scale integration work that follows.