We’ve all heard stories about acquisition deals that fell apart or delivered far less than expected after the sale closed: key employees leaving, discoveries that the seller misled about the company’s financial health, vendors that fled, etc.
The good news is that it’s all avoidable. We asked the speakers from our upcoming Distribution M&A Executive Workshop to share their top tips for ensuring that post-deal integration goes as smoothly as possible. Here's what they said:
1. Leave nothing unsaid.
Communicate, communicate and communicate … especially with key employees, vendors and customers. No integration goes exactly as planned. Communicate upfront what you are doing and why you are doing it (which, theoretically at least, is for the benefit of the business … thereby benefiting the customers and vendors if your business is a key link in the supply chain), so everyone is aware of what is about to come. Less flak when things don’t go 100% to plan. – Jim Miller, principal, Supply Chain Equity Partners (Workshop sessions: “Distribution M&A Strategy Drivers” and “Financial Alternatives”)
2. Involve both the buyer and seller in developing a post-transaction vision.
It is critical that buyers develop a post-transaction vision for the combined organization that has been jointly developed by buyer and seller. Buyers should also develop a 100-day plan that outlines critical items that must be achieved early. This plan should identify key milestones and be reviewed monthly to ensure tasks are accomplished in a timely manner. – Charley Hale, former CEO, FCX Performance (Keynote speaker: “M&A Best Practice: What I Wish I Knew 20 Years Ago!”)
3. Understand the seller’s culture on the ground.
Simply put, culture is “the way we do things here at our company.” Cultural fit of buyer and seller is crucial to success, but despite lip service to the contrary, it’s often misunderstood. Cultural mismatch causes pain and delays the success of the acquisition by years if the buyer needs to replace the seller’s key people. Before getting too far into the deal, find out what the seller’s culture on the ground really is. For example, if the seller’s field sales staff is highly independent of management and autonomous about pricing, customer selection, product emphasis and work habits. If the buyer can’t abide that embedded culture, it’s not a good deal even if the “strategic fit” seems perfect. – Brent Grover, Evergreen Consulting (Workshop sessions: “M&A Strategy Fundamentals: Two Success Stories” and “Financial Due Diligence”)
4. Involve a cross-departmental team to create your integration plan.
The integration plan, well-thought-out and in place before closing, should be developed with input and post-closing assistance of the seller and its management team, and should cover all of the areas that are impacted by an acquisition such as accounting, IT, marketing, HR, sales, strategy, culture and so on. Financial incentives can and should also be established for the selling and buying management teams to increase the likelihood that the plan will happen as expected. – Joseph Pease, chairman, Pease & Associates, CPAs (Workshop sessions: “The Art of the Well-Crafted Deal” and “Noncompetes, Representations & Warranties, Tax Implications”)
5. Don’t make promises you can’t keep.
Don’t ever say "nothing is going to change," because at some point something will. You’ll get backlash. Understand the people that make up the company you’re acquiring (what you don’t know will hurt you), and make sure you retain the good talent. Managing the people is the most critical part of integration.
Hear more on integration best practices from Mike Marks, workshop co-host and managing partner of Indian River Consulting Group, in this video:
Read more from Mike Marks on what's driving M&A in distribution in Distribution Playbook, pt. 1: Unlocking Shareholder Value.