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Harold Resnick: the acquisition deal is done. Now what?

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Image: Harold ResnickFollow a carefully crafted post-acquisition plan that embraces all aspects of the desired integration.

Harold Resnick has earned international recognition as a leading authority and innovator in organizational transformation and leadership development.

Here he sets out guidelines for managing post-acquisition analysis.

Most acquisitions are made with the expectation that one plus one will equal three. Unfortunately, post-acquisition analysis too often reveals a result that is something less than two.

Why is this so? During the due diligence phase care is typically taken to examine the organization’s products and services, customer base, internal operations, financial performance, key talent, etc. The potential promises an exciting outcome. However, common statements after the fact illustrate a different reality. For example:

  • The cultures of the two organizations clashed.
  • Key talent didn't integrate well and left shortly after the deal was done.
  • The employees never embraced the acquisition and their resistance became a drag against achieving the anticipated results.
  • Customers didn’t care for the acquisition and the company suffered unexpected erosion of the customer base.
  • Organizational systems, technology and work processes were much harder to integrate than initially thought.

Much of the due diligence prior to the acquisition focuses on the hard facts of the acquisition that can more easily be measured: financial performance, customer base, history of organic growth, profitability, etc. Much of the difficulty after the acquisition comes from the softer side of the organization: culture, human resistance, loss of key talent, integration of work processes, etc.

The solution

The solution is to follow a carefully crafted post-acquisition plan that embraces all aspects of the desired integration. This plan employs a project approach with a leadership team dedicated to its implementation. Following are some of the key ingredients of this approach.

Select the acquisition integration team

Depending on the nature of the acquisition process, this team may be formed in advance so that its plan and the associated costs are an integral part of the acquisition. In other circumstances, these teams cannot be activated until the acquisition has been announced.

"The strategic integration plan should be presented to the senior leadership from both organizations so that it is understood and fully endorsed."

The Acquisition Integration Team Leader should be a member of the senior leadership of the acquiring company. This person must have the availability to devote sufficient energy to this task – perhaps even a full-time assignment – for an extended period of time. Once the leader is selected, a small, integrated leadership team should then be selected to guide the post-acquisition integration work. The structure of this team will vary, but some of the functional areas that should be considered include:

  • Sales and marketing
  • Operations
  • Finance
  • Human resources and organizational development
  • Research or product development
  • Customer service

It is also important to consider whether this acquisition leadership team will be comprised solely of individuals from the acquiring company or whether an integrated team should include key players from both organizations. If an integrated team is selected, it is generally preferable to have one person per function – selecting the best candidate from either organization.

Develop the Acquisition Integration Strategy

This team then collectively develops the integration strategy.

  • What will be integrated and what will be left to run as an independent organization or sub-unit?
  • Will the areas that are not being integrated be left alone permanently or will they also be integrated over time? What will be done in parallel and what in a serial manner and over what time frame?
  • What will be the customer communication and integration strategy? How will customer defections be minimized and satisfaction maintained?
  • How will products and services be merged?
  • How will financial systems be integrated?
  • How will the sales and marketing organizations be assessed? To what degree will they be integrated and how?
  • What enterprise technology platforms will be selected and how will they be integrated?
  • What work processes will be merged and how will that be accomplished?
  • What are the cultural distinctions of each organization? How can the optimal culture be developed and embraced by the employees of both organizations?
  • What will the resulting organizational structure look like and how will the new leadership team be formed?
  • How will key talent be assessed, retained and nurtured?
  • How will the change process with employees be managed?

The strategic integration plan should be presented to the senior leadership from both organizations so that it is understood and fully endorsed.

Create the Integration Sub-Teams

Once the overall integration strategy is endorsed a number of sub-teams should be created to lead the integration work, including individuals from both organizations. The leader of each sub-team should be a member of the Acquisition Integration Team. Sub-teams often include sales and marketing, operations, finance, IT, human resources and organizational development, products and services, customer service, and communications.

Each team develops a detailed implementation plan, endorsed by the Acquisition Integration Team. This ensures that the work of the various sub-teams occurs in the right sequence, guided by a master plan and approach.

The size and scope of the acquisition on the work of these teams may extend from a few weeks to several years. The Acquisition Integration Team remains active until the resulting company is performing as expected.

The cultural and human side of the equation

Cultural conflict and resistance to change are the most common causes of the failure of acquisitions to achieve their intended results. To help prevent this outcome the following actions are recommended:

  • Assess the culture of both organizations. Understand the differences – decide which attributes are desired. Then acknowledge the differences and integrate them over time.
  • Assess the key talent of both organizations to determine how to best retain and merge the key talent into one high performing organization.
  • Charter and guide the work of the Acquisition Integration Team. This will create the pathway for a good acquisition process.
  • Build and follow a comprehensive external and internal communications plan focused on two way communications – seeking inputs and reactions as well as delivering messages and status.

Always keep the end in mind

The acquisition process is messy. There will be unanticipated revelations and reactions. Key actions will result in both intended and unintended consequences. It is essential that the leadership team have a clear picture of the end in mind so that the issues that emerge do not divert the process from its intended goals.

November 2011.