The rationale behind the acquisition (the “business case”)
To efficiently begin the integration process, it is imperative that the rationale for the acquisition be properly explained to all your employees.
To do so, you will need to draft a brief but powerful statement explaining the reason for the acquisition. Never assume that there is an informal consensus within your company. On the contrary, conflicting ideas, harmful rumours and doom-and-gloom scenarios likely abound and will unfortunately grow (unless the company has a long history of successful acquisitions, which is rather rare among small and medium-sized businesses). What is more, the acquired company’s employees will likely be apprehensive and pessimistic.
Accordingly, the first step consists in enthusiastically describing the main reasons for the acquisition. On a preliminary basis, this also includes the merged company’s general vision. A major acquisition can change a company’s vision. For instance, it can provide an international dimension which until then had been relatively marginal.
As part of the first step, the main lines of the merged company’s future competitive positioning must also be formulated and presented to the key personnel of both companies (this position will be subsequently fine-tuned). In other words, you need to determine what your competitive market position will be.
Lastly, it is recommended to explain very early on in the process the success factors for the integration along with the potential pitfalls. The process should be transparent and pragmatic because the integration will occur in the field, in the day-to-day operations of two companies that are still viewed as ruthless competitors by many people.
Mechanisms and structures to be implemented
Now that the reasons for the acquisition have been explained to everyone, an integration structure must be set up.
I am proposing the following:
Transition leader team:
The methodology described in Graph 1 is centred on a transition leader team. This team should include the presidents and senior managements from both companies. It may be a good idea to include an outside consultant. The team has a key role. Basically, this team is where difficult decisions are made and where certain internal discussions are decided, and it has final say.
The Transition Leader Team defines the responsibilities of each work team along with the timetable. It must also choose each work team’s manager. Next, the work team members are chosen by the manager and approved by the Leader Team. The Transition Leader Team has other responsibilities, such as:
- Drawing up the transition policies and reviewing the integration options ;
- Providing the various work teams with appropriate instructions ;
- Recommending organizational changes needed for smooth integration ;
- Ensuring that key personnel is retained ;
- Revising the organizational charts proposed by the work groups.
Lastly, very early on in the process, the Transition Leader Team will have to address external communications. It is crucial to properly handle messages circulating in the industry. Remember that the market abhors a vacuum, so if you say nothing, others—particularly the competition—will have something to say.
I suggest that you set up four work teams that will head the company’s major functions: Marketing, Production, Finance, and Human Ressources. These groups will do most of the work and will have to submit to the Transition Leader Team any aspects that are strategic or critical to the success of the endeavour. The groups will have to answer a multitude of questions, such as:
- Which products will be favoured? Should the combined range of products/services be kept?
- Will there be any inconsistencies in pricing?
- Are there choices to be made among the distribution networks?
- Should the human resources policies be standardized?
- How can production be integrated?
- Do technological choices need to be made?
- How can the company be integrated with respect to accounting systems?
Certain technical projects, such as building appraisals and technology assessments, should be outsourced. Consultants should submit the conclusions of their reports to the relevant work team or, in some cases, to the Transition Leader Team.
Acquirer’s head office:
The acquirer is sometimes a division. In these cases, the head office may choose to put a representative on the Transition Leader Team (somewhat rare) or require regular reports on the progress of the integration work. In any event, the Transition Leader Team must take into account the head office’s vision, prerogatives and limitations in its integration approach.
Preliminary action plan
To ensure a quick startup, a preliminary action plan by work team is required.
Besides speeding up the process, the action plan puts the emphasis in the right places from the outset. It is sometimes difficult to rectify a poor start, which is often very costly.
To conclude, smooth integration is achieved by dealing directly with all the key issues confronting the company through an approach that allows for quick corrections and ongoing feedback between senior management and the company’s middle managers. Best of luck with your acquisition!