Mergers & Acquisitions

The importance of integration in acquisitions

In today’s market, properly executed acquisitions can deliver great value and excess returns on investment. Many CEOS opt to acquire other businesses to achieve cost advantages, grow revenues rapidly, or to acquire a set of skills or technology strategic to the growth of their companies. However, if not thoroughly planned for, an acquisition can have a disastrous effect on the combined organization.

Perhaps the most common reason that acquisitions are ineffective is due to the lack of a comprehensive integration strategy. Successful integration is one of the most challenging aspects of the deal and needs to be thoroughly planned for prior the the deal getting done. In this blog post, we outline the three key areas to address in setting an integration strategy:

Get organized and prioritize issues

Once a deal is announced you should begin prioritizing all of the pertinent issues that need to be addressed prior to close. Essentially, you need to develop a clear yet flexible plan for both the short and long term. Additionally, you want to make as many major decisions as you can before the deal is actually consummated. Try to assemble an integration team comprised of handpicked leaders that have experience facilitating the merging of two organizations. Start building out a timeline of when you expect key deliverables to be completed and hold yourself and your team accountable.

Making cultures work

A likely cause of integration failure is clashing of two organizational cultures. Every organization has its own culture- a set of norms and values that reflect the identify of the business. When acquiring another business, there’s going to be some natural friction that occurs as a result of combining two organizations with separate cultures. One of the biggest challenges in any M&A transaction is making the fundamental decision of what the merged company culture should look like, and putting it into practice. The most experienced and effective acquirers will develop a set of practical tools for facilitating cultural integration.

  • Diagnose the most important differences between the two companies’ cultures
  • Define the culture you’re trying to build between the two merged companies
  • Develop a culture-change plan, then sustain and measure progress

Resolve people and power issues quickly

Your people and their commitment to the newly formed company can make or break the acquisition. Transparency is crucial. Sit down to with key stakeholders and address their concerns as early as possible. An acquisition can fundamentally affect roles in the organization and the working dynamic amongst teams. In selecting leaders for the newly formed company, you’ll want to select individuals from both organizations who are enthusiastic about the new company’s vision and can contribute most to it. Create critical deadlines for filing roles for both the C-suite and direct reports, to avoid having some of your best people poached by competitors.

Category: Mergers & Acquisitions

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Vistage Staff About the Author: Vistage Staff

Vistage facilitates confidential peer advisory groups for CEOs and other senior leaders, focusing on solving challenges, accelerating growth and improving business performance. Vistage member companies grow 2.2x fa…

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