The integration of acquired companies into the organisation, systems and culture of your business poses urgent questions.
Firstly, there must be an appraisal of why the deal was done and whether any additional gains exist. Secondly, how far should the separate organisations, systems and cultures actually be integrated or aligned.
"We do not assume that delivery of 100% integration alone will deliver shareholder value"
Accounting for the fact that most acquisitions transfer value from the buyer to the shareholders of the acquired company, this must include frank analyses in a safe environment. Both the immediate and long term commercial imperatives and any inertia within the acquiring firm must be reconciled.
Doing Business - Customers and Operations
Where possible, it is prudent to run the acquired business with little change for a brief period. This is to assess the business as it actually is to avoid undermining either its customers or processes. Pre-acquisition due diligence is external and thus has limitations until more complete information is to hand.
Rolling assessment must rapidly start of which acquired customers are important to the buyer. These may not necessarily be the same as those felt to be important in the acquired company. Continuing this process across billing cycles is necessary to distinguish the relevant facts.
"Aggressive integration strategies require more rigourous objectivity to avoid value destruction"
Operational integration of teams and technologies must be broken into three broad tiers:
- central functions that are more immediately integratable (which may include HR, finance, associated ERP platforms, facilities or IT)
- functions that will benefit from a phased approach to integration
- functions that will not be integrated yet
The balance between tiers 2 and 3 depends on how aggressive an integration strategy must be. Speed requires more rigourous thought and objectivity. For example, customer facing teams and technologies maintain service levels and customer satisfaction. Dismantling sales or relationship management teams or their support structures requires additional consideration of likely outcomes.
Our experience is that great care must be taken at this stage. Inertia and other human factors in either the acquiring or acquired company can result in unobjective and undesirable choices.
Personalities and Culture
Integrations can excel technically but still fail. Highly focused and complete execution of a well crafted integration plan will not succeed without catering for the human factor.
We believe it is necessary to go beyond retention via contractual golden handcuffs. Human capital is very often the most important asset gained when making an acquisition. If so, it must be built on where appropriate. A "successfully" integrated company can lose the edge for which it was originally bought because of how either company's personnel feels.
"We believe it is necessary to go beyond retention via contractual golden handcuffs."
Rolling risk assessment of frustration in either acquired or acquiring staff can identify vulnerabilities and then mitigation strategies can be formed, ranging from promotions, restructures to negotiated exits. It is often the case, for example, that over-dependence on immediately irreplaceable junior staff carries the most immediate risks to client satisfaction. Loyal clients who have necessarily been deprioritised may also trigger friction in acquired staff.
"A "successfully" integrated company can rapidly lose the edge it was bought for because of how companies feel"
Identification of the two preceding corporate narratives and their reasons is key to evaluating your requirements versus the environment. This is of particular importance in companies enduring operational, financial or reputational stress, with the poor outcomes that can come from the group-think and organisational politics that result.
An audit of intellectual property must be identify and catalogue the designs, patents, trademarks, copyrights and other intangible investments. These must then be registered with the relevant authorities where appropriate. Enforceability or lack of enforcement must be discussed, particularly where previously unknown intellectual property is unearthed,
"Investment in intellectual property must be unearthed and reputational or litigation risks neutralised"
Although often overlooked in integrations, we recommend a thorough audit of the information repositories in the acquired company. This can extend to a lack of filing hard copies of contracts or other documents. Were documents or information to become untracable, the buyer would have also purchased reputational or litigation risks.