Change is the only constant in the business world, and with the proliferation of mergers and acquisitions (M&As) occurring over the past several years, this trend doesn’t show any signs of slowing down. By now, M&As have become so commonplace that everybody has heard of them and how they occur. Although there are many different flavors of M&As, the one we’re focusing on here is an acquisition, which has its own set of rules and regulations.
The Differences Between Merger and Acquisition Integration
Although mergers and acquisitions are seemingly cut from the same cloth, the results differ greatly when it comes to the integration of the two companies or divisions. And while there are different types of integration involved in M&As (including subsidiary and consolidation), only one form (statutory) is used in a pure-play acquisition. A statutory merger is when the target company’s assets and liabilities are acquired and the target company ceases to exist, as now it’s part of the acquiring company.
Why a Smooth Post-Acquisition Transition Is Essential
Naturally, M&As are done strictly for business purposes, either to increase value or market share or to leverage the reach of the acquiring company. So this bodes well on paper for the number crunchers, but integrating the acquired company or division is another matter. One of the large challenges for any company is ensuring that the acquisition not only proceeds on schedule and on a budget but that in the long run, the value that was expected to be gained through the transaction comes to fruition.
7 Steps for Successful Post-Acquisition Integration
The synergy of one company acquiring another is fraught with issues, and merging cultures isn’t always something that the bean counters factor into their projections and spreadsheets. Merging two unique companies into one can certainly bring down the perceived value of the entire deal. Having a checklist of the steps required to smooth out the transaction and the aftermath is one of the key steps to success in this area.
1. Appoint a Team Leader for the Integration Process
In virtually every instance, a strong leader is required to facilitate the inevitable changes that come with the territory. In some cases, the CFO of the acquiring company is the leader, but it’s not unusual to have an experienced controller or even a third-party consultant take the helm. This leader must possess not only the business skills required but the people skills that are necessary for post-acquisition integrations.
2. Create Benchmarks
Needless to say, the goals and benchmarks for the integration must be clearly defined in advance, which includes both short- and long-term goals. Once the endgame is established, the blanks can be filled in to reach that goal. Of course, there will need to be tweaks along the way, but knowing there is some wiggle room for on-the-fly adjustments is part of the process.
3. Get Aligned With Other Departments
The leaders of all the affected departments need to be on the same page, and this includes sales, finance, operations and HR. Understandably, there is a lot of uncertainty when there are acquisitions (and the shedding of redundancies, which is inevitable), so remaining transparent with these department leaders is advantageous in the long run, as invested and valued employees are the least likely to move on as the process begins.
4. Understand What the People Want
This is where the situation is less about business and more about people. It’s the workers who make things happen, and, like in the previous step, honesty and transparency will both go a long way. Whether it’s retention bonuses for those who stay or creating a contingency staffing plan in case more employees than expected leave, putting a plan in place for every possible scenario will pay dividends.
5. Document All Critical Processes and Systems
Different companies have different ways of going about business as usual, so assuming the acquired company will adapt to the “new” ways of the parent company is dangerous and can have disastrous results. Failing to fully document those processes and systems can cause issues both at the time of the integration and long afterward.
6. Check the Integrity of the Data
This is the time to fine-tooth comb through the data you’ve acquired. Eventually, this information must be imported (or merged) into the current system, so it’s imperative that the data is clean and its integrity has been checked.
7. Evaluate the Results
Finally, once this process is complete, you can find which of the systems (the acquiring company’s and the target company’s) is the right fit, although the final result might be a hybrid of the two companies’ systems.
Taking Advantage of the Tools That Are Available
No matter what the industry, a good portion of post-acquisition integration steps are handled both during the M&A process and for a period afterward. One of the indispensable tools for any company looking to save both time and money during the process is a virtual data room (VDR). A VDR is an online “deal room,” where companies involved in an acquisition and the subsequent integration steps can slash both expenses and time through every stage of the transaction. It ensures that all the highly confidential documents remain secure, helping to verify the integrity of the deal. The features that a quality VDR vendor provides include document and version management, top-level encryption, backup, high-level administrative controls, multiple layers of security and 24/7 customer support.
How CapLinked Can Help Seal the Deal
CapLinked, a leader in the VDR space, provides secure virtual data rooms for all phases of an M&A transaction, which include the post-acquisition integration process. A CapLinked VDR features a user-friendly interface that is compatible with virtually every OS, and, because of that, it gives users the ability to upload and download documents from virtually any type of computer, tablet or smartphone from anywhere around the globe. To learn more about how CapLinked can help smooth out your M&A integration process, start a free trial.
Chris Capelle is a technology expert, writer and instructor. For over 25 years, he has worked in the publishing, advertising and consumer products industries.