Research conducted by Cass Business School, covering 12,339 deals including 2,917 acquisitions of distressed companies from 1984 to 2008, concluded that price was not the determining factor for successful acquisitions but that post-acquisition integration was the key (Moeller).
But how do we build integration teams to achieve that elusive success? How do you manage your talented managers into a cohesive force that is capable of doing deals successfully?
At The Portfolio Partnership (TPP) we are embedding our Acquisition Process into various clients to create a road map for success. Our Acquirer’s Playbook drives to the jugular of the post-acquisition integration issue by dealing with it on page 1 not page 21. Endorsed by leading practitioners including Summit Partners, Grant Thornton, Eastern Insurance, Livingstone Partners and Goulston & Storrs, it’s a great method for bringing all of your actors onto the stage, at the right time saying the right lines!
Integration is a people skill but it needs discipline to be successful. It requires hard processes and soft human touches. It’s a combination of art and science. And of course hard work and practice helps.
9 Key Elements
Here are 9 key elements to help you build an integration team:
- Timing is everything. Do it up front, after you are clear on your strategic direction. Let integration thinking influence your Acquisition Profile (criteria for attractive targets). If you’ve only done a few local acquisitions, be very careful trying to acquire a target company in another country. Are you really ready for that level of risk? You’ll never see technology companies on Warren Buffet’s acquisition list. Doesn’t like their cycles, doesn’t have the skill-sets in the team to drive them.
- Once you establish your priority list based on your acquisition profile, assemble the relevant team for each target. If these targets are all the same type of company, in the same sector, then perhaps you only need one team. The team needs to include one person responsible for the success of the deal e.g. the divisional CEO who will control the target post acquisition but that doesn’t have to be the project manager of the deal. Executives from sales, marketing, finance, legal, IT, relevant technical experts will be assigned to the team. Some of these team members workload on the acquisition will stay very light until things get serious. External trusted advisors should join the key planning meetings (ROI on this small cost is huge).
- Value is perceived by acquirers. Each acquirer has a different perceived value of a target. Why? Because each acquirer has a different post-acquisition integration strategy. So early on, the financial model needs to be built showing how the deal will flow through to the group numbers.
- The discovery phase and investigation of a target can’t be just about historical numbers and facts. It must also include the testing of your integration strategy no matter how naive that strategy might be.
- Moving further down the acquisition process is all about intensifying your post acquisition integration viewpoint and strategy. Did HP do this when buying Autonomy ($9 billion write off) or Bank of America when buying Countrywide (post acquisition costs running at $47.5 billion)? Is the team clear on the integration strategy?
- When the time is right to negotiate a deal, there can only be one deal leader who will seek advice from team members when required and a relevant Board mandate. But one voice is key.
- Due diligence is a team effort and each type of due diligence needs to be assigned to an accountable manager (including external advisers) who will report findings to the project manager. Use the process to validate your post-acquisition integration strategy NOT just to check historical facts.
- Legal agreements are often best completed with a combination of external legal expertise and internal legal leadership. There’s no competition here to see who is smartest! It’s a team effort and often from a negotiation point of view it’s better for external council to float an idea keeping the client’s powder dry.
- Post acquisition integration success is all about accountable leadership, communication and speed. Think of it this way. This is an opportunity for the team’s hard work, careful planning and skill to reap rewards. Remember in most deals, you are onboarding between 20 and 1000 new employees, on one day. You’d better have thought it through.
These are the headlines. Reach out to me if you want a no obligations discussion. Ian@TPPBoston.com
