How to Be Successful in M&A: Think Integration

You’ve developed your strategy, identified the right markets, negotiated with the owner and papered the deal. If you think once you sign on the dotted line your job is done, you are mistaken. The M&A process doesn’t end when the deal closes. M&A is really a journey “from beginning to beginning” where the consummation of a deal is actually a fresh beginning for the newly merged company. Ensuring the pieces of both organizations mesh the correctly during integration is crucial to the success of an acquisition.

Poor Integration Can Ruin An Acquisition

Integration issues can plague a company long after the deal closes. Take United Airlines as an example. Although it’s been five years since the merge with Continental Airlines, the company is struggling to integrate its workforce. United’s flight attendants are still operating as if they worked at two separate companies, which has created operational challenges, damaged employee morale and company profit, and created unnecessary complications. Since the merger, about six percent of United flights have been delayed due to issues such as crew scheduling or maintenance problems. Understandably employees are frustrated. The failure to integrate effectively has eliminated the synergies – such as economies of scale and scheduling flexibility – that one might derive from having a larger workforce.

Why Do So Many Companies Struggle with Integration?

Leaders tend to think about integration as an afterthought, when really they should begin thinking about integration long before the deal closes. When it comes time to implement, they are “suddenly” faced with unanticipated challenges that could have been avoided or planned for had they started looking at integration earlier.

“What almost always gets underestimated, though – and often overlooked altogether – during due diligence is the actual integration of the new capabilities and how (or whether) it will work,” says John Kolko, Vice President of Design at Blackboard.

And as Kolko points out, if you don’t begin thinking about integrating prior to closing the acquisition, you may end up acquiring something that isn’t aligned with your strategy.

When you start thinking through integration issues and what the newly merged company will look like, you can get an idea of if and how the acquisition will operate post-closing. Will you let the company operate as a standalone business? Will you train employees to use your sales system? How will you leverage a new capability with those you currently have? Use your strategic rationale for acquisition to guide your decisions on integration.

Develop a 100-Day Plan

Thinking about integration early also allows you to be prepared and swiftly implement your plan once the deal closes. As the buyer, you only have one chance to make a good first impression with your new employees. The first 100 days of an acquisition are a critical time period when employees are less resistant to change. You have a unique opportunity to make sure everyone is in alignment during this time. Develop a 100-day plan prior to closing so you are not scrambling to put something together when it comes time to execute.

Photo credit: David Goehring via Flickr cc

2 comments

  1. Reply

    I really like the idea to develop a 100-day plan for a merger. I think it makes a lot of sense to realize that not everything is going to happen immediately when two companies come together, but setting a good goal and trying to get everyone to work towards it seems like sound advice. Thanks for taking the time to share!

    1. Reply

      Thanks for reading, Tobias and glad you find the information helpful.

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