Post Merger Integration: Getting The Formula Right

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As hard as it is to acquire a company, it is even harder to integrate and create the value that owners envision. With the risk and cost that you incur in an acquisition you need 1 + 1 to equal 3. That is a possibility with the right deal and the right plan. Throughout various financial crises (2008, 2001, late 80’s) historically many owners create a tremendous amount of value, and I expect the same will be the case as we emerge from the current climate.

The first thing you need to do is set the direction of the newly combined entity. To some extent, everyone’s job will change, and they will need direction. The degree to which you can clarify the new direction, particularly for your management team, will be one key to realizing the value from the deal. It’s important to communicate the integration objective, and the progress, to the entire organization. You want your communication to represent the single point of truth.

When you leave an information void, someone will fill it up and you can’t believe some of the stories that get made up to explain the change that’s underway.

Your people, and especially your management team, are your most valuable assets. A significant value driver in acquisitions is acquiring additional talent. The first item I think about is what the resulting management team and org chart looks like. Not only is the new management team going to help you drive value from the deal, but they will be essential in managing the cultural integration you need to create a high-performing organization. I frequently see the post-deal management team consist of at least a few people from the acquired company.

Many companies task the new leaders with a “first 100 days” plan to accelerate the benefits of the deal. What to do in the first 100 days? Provide a positive experience for the new team, gain control over financial reporting and costs, ensure the plan for synergies or other benefits realization is on target and be prepared to deal with unexpected opportunities and challenges. For many projects, how you start has a huge impact on the overall success; use the first 100 days to set the tone for making your deal a good one.

Are you considering a merger or an acquisition? If so, what are some of your challenges? Let us know how we can help you.

COVID-Related Stimulus Information

Negotiations are still underway between Republicans and Democrats regarding passage of a bill containing additional economic stimulus. There are philosophical differences that need to be reconciled, such as support for state and local government and a rescue for the U.S. Postal Service. With the Republican convention this week, and the Senate adjourned until after Labor Day, don’t expect any real progress this month. In the meantime, this is a good time to review your plan for PPP loan forgiveness (including workforce additions), payroll tax deferrals and other stimulus items as you prepare for the close of this year and the plan for 2021.