In the recent past, there was an abundance of mergers and acquisitions occurring, and although there has been a temporary slowdown in today’s environment with the freeze of the credit markets and the squeeze on cash, significant opportunities will arise with the emergence of rock bottom prices. So, to take advantage of the rock bottom prices, it is critical that you be in the 20% of those who achieve the intended results in order to make the significant efforts involved to accomplish the merger and/or acquisition yield a significant return on your investment.
In my experience in working with mergers and acquisitions, they do not fail based on the plan; instead, they fail with poor execution. Therefore, to be in the 20%, a successful transition and integration plan is key to success. There are several critical success factors in a solid transition and integration plan.
Utilizing the elements of a recent client success as a blueprint for developing a solid integration plan, the following key points achieved the intended results:
- Clarify the business model – surprisingly, many of the 80% of mergers and acquisitions that fail to achieve the intended results do not clarify their business model upfront and stick to it. This is a critical success factor, as it provides a clear vision for the organization. With a clear vision, individuals not only understand where the company is headed but they also are better able to contribute to achieving the vision. In my experience with mergers and acquisitions, I’ve been on both sides of this equation. In one example, the acquirer provided a clear picture of the business model to the acquired; however, the management teams of the acquirer did not have the same clarity. In this case, although the business model provided significant opportunities for synergy, it did not yield the intended results due to the mixed messages and unclear business model. In another example, the acquirer had a clear business model, initially failed in execution but was able to salvage the core of the benefits by re-invigorating and focusing on the business model. Lastly, in another example, the company had a clear business model and clear execution plan and achieved the intended synergies and bottom line results.
- Keep the transition impact as low as possible – often underappreciated yet critical to success is keeping the transition impact as low as possible throughout the transitional period. When companies keep the transition impact low on employees, suppliers, customers and other business partners, it leads to a smoother and more successful merger/ acquisition. Specifically, this means achieving the following results on a daily basis:a. Uninterrupted cash
b. Uninterrupted performance for customers
c. Uninterrupted supplier relationships and payments
d. Retain employees, keep them informed and minimize fearThese results are often assumed (perhaps because they used to run smoothly prior to the merger/ acquisition) – never assume, as these require an intense focus and coordination to achieve. Both of these qualities are challenging in times of intense change. In my experience, whether the change is perceived as positive or negative is irrelevant – significant change itself can lead to distraction and confusion. - Involve and value people and relationships – as obvious as this sounds, it is often overlooked due to the intensity and workload associated with completing the merger/ acquisition. In my experience, this can be one of the most important keys to success, as people drive results. It is critical that employees, customers, suppliers, and other business partners are involved in developing and/or executing the transition and integration plan. Of course, the direction is set via the business model and Executive leadership; however, with that background and clear priorities, people will rise to the occasion and contribute to success through involvement and participation. On the other hand, if they are left outside of the process, they will likely become distracted, disgruntled and ineffective – not an ideal way to treat your #1 asset.
- Provide constant communication – as is essential in any effective business, constant communication is cornerstone. Do not wait until everything is nailed down or approved to begin communication. By then, people have filled in the gaps with what they believe to be true, which is almost always far worse than reality. Of course, it is not feasible to provide specific information based on legal and business considerations; however it is eminently possible to provide updates on what you do know and let people know that you will continue to update them as information becomes available (and /or is able to be communicated). Many times, it is not the specifics communicated that matter; instead, it is the fact that leadership is making the effort to keep everyone informed and provide a forum for questions. There are many tools and venues for providing constant communications, so there are no excuses – consider town hall meetings, email, telephone, web-conferencing, newsletters, etc. But, it all boils down to person-to-person contact – again, value your #1 asset.
- Ask questions / ask for feedback – as simple as this sounds, asking questions, whether to yourself, direct reports, peers, management, customers, suppliers, or business partners has proven to be a key ingredient to success. In my experience, often times, taking a step back and thinking about the key questions to ask can prove to be quite valuable and lead to brainstorming key steps/ tasks required in an effective transition. Just as with mistakes, there are no bad questions – only bad trends of the same questions/ mistakes repeatedly. In addition, asking questions and requesting feedback of employees, customers, suppliers and business partners will undoubtedly lead to important revisions to plans that will ensure success. Additionally, multiple heads are always better than one (or one group) – so long as the business model and vision is clear, asking and encouraging lots of questions will result in an improved transition/ integration.
- Remember the fundamentals (dot your I’s and cross your t’s) – just as most business plans do not fail in formulation but instead fail in execution, the same holds true for mergers and acquisitions. Effective execution relates back to the basics – people and process. People are the thinking power and the executors of the organization, and people execute with processes. Implementing processes boils down to planning, executing, auditing and standardizing combined with constant communications and updates. Relating execution to mergers and acquisitions, the key is to develop detailed execution plans with accountabilities for keeping the organization’s blocking and tackling intact (running the business, fulfilling orders, paying employees, invoicing etc) while focusing resources on transition and integration projects/ action items (such as combining branches, cross-selling, developing new products and services, implementing new compliance, legal and audit requirements etc).
Why be part of the 80% dissatisfied with merger and acquisition results? Instead, put together a plan to be in the 20% by concentrating efforts on the transition and integration plan. In essence, beyond clarifying the vision and business model while focusing on keeping disruption to a minimum, the remainder of the critical success factors in achieving merger/ acquisition success boil down to transforming your people and processes into profit.