Designing, Planning and Implementing your M&A Integration Programme

Most people believe – supported by lots of evidence – that getting value out of M&A is difficult, and far less consistently successful than it needs to be. While this is true, it’s important to understand that just because something is difficult to do, that doesn’t mean that it’s complicated or hard to understand. In fact, many deals fail because people overcomplicate integration post-close. Like dieting, the concept is easy: eat less and move more. What makes it hard is that life gets in the way.

I was recently asked to try and summarise my own 20 years of experience into a few simple ‘hints and tips’. Getting past my own outrage at the request to summarise the bulk of my entire career into a few pithy statements, I discovered to my surprise (and disappointment?) that it was in fact easier to achieve than I presumed. So, for what it’s worth (and reminding everyone that exceptions or variations to these will be legion), here are my own personal learnings:

1. Understand how you will be a better owner of this company: As soon as you have a specific target you’re considering, build a clear (albeit high level) view of what you would need to do with the acquisition – and your own business – post-close to deliver added value. Do not wait until due diligence or later; testing your ability to deliver the benefits identified is just as important as the (theoretical) benefits themselves.
   
   
2. Consider all your deal options: When adding new capabilities to your organisation, a 100% acquisition is only one of several options, both in general and for any specific target. Always consider every option in terms of the balance of control, value, risk, and business disruption.
   
   
3. Be able (not just willing) to walk away from the deal for post-close reasons, even up to the very last minute: Acquisitions that fail post-close almost always do so when the buyer is unable to deliver the benefits, and yet deals rarely get pulled pre-close over concerns of an inability to deliver! Designing and planning your integration in full during due diligence will help cool deal momentum and ensure you are confident of your ability to deliver post-close. Build an environment in which it’s OK to challenge assumptions pre-close, plans and data remain objective, and walking away for the right reasons at the final hurdle is seen as a good thing.
   
   
4. Do not leave it alone post-close: In most cases, the price you’ll pay will reflect the value of the stand-alone business, if not more. The only way you’ll get a high-performing return on your investment is if you do something with the business once you’ve purchased it. The larger the ‘premium’, the more value you’ll need to extract post-close, more quickly. Getting support for a later integration is also much more difficult.
   
   
5. …but do not assume full integration is the right answer! Build your post-close operating model from the ground up: Integration is hard, disruptive, and risky. Many times, ‘just smashing everything together’ is assumed to be the only, or best, option. That’s why most fail. Use each of your desired benefits to define exactly what should be integrated, improved or both, and leave the rest as-is. This ‘triage’ approach will keep your overall post-close programme focused, simpler and faster to implement.
   
   
6. Connect all the dots pre-deal to post-close: Integrations that succeed often do so simply because there is a clear, point-by-point line of sight between each and every deal objective and the integration milestones that deliver it. They also understand the interconnection of each aspect of the operating model (process, culture, metrics, technology, structure and more) and how changes to one need to stay aligned with others. Other connections are critical: Detailed plan timings and costs are fed back into the deal financial model and valuation; due diligence is used to test integration plan assumptions; integration design used to steer communications.
   
   
7. Manage integration and improvement as a formal programme: As with any transformation programme, it is typically good practice to distribute integration workstreams and activities to functional and business groups, facilitated and coordinated by a central individual or team. Nevertheless, a dedicated programme manager or team is critical to ensuring this decentralised approach retains momentum, stays aligned and remains on track.
   
   
8. Resource it properly within your business: While it is possible (and often advantageous) to use outside groups to co-ordinate the overall integration, accountability for much of the work will invariably rest with middle management and their teams within business functions, with significant work to be done alongside their day-to-day roles. It is unrealistic to assume that this will be possible without the help, so make sure they are supported with additional resources where needed.
   
   
9. Treat culture seriously, pragmatically, and without fear: Most acquirers either underestimate the impact of cultural differences and ignore it, or overestimate the challenges in overcoming them and ignore it. While not easy or fast, culture can be measured and proactively adjusted to the long-term benefit of both firms. Rather than thinking in terms of wholesale cultural transformation, identify specific ‘hot spot’ differences that, based on your operating model and plans, will need alignment to support your integration. Adjust other aspects of your operating model – processes, metrics, incentives and more – to encourage the shift. But never forget that cultural change ultimately requires changes to leadership behaviours, and often that means changes to leadership. Small steps, be patient and be ready to take some hard decisions.
   
   
10. Lead integration from the front; be a leader: Integrations ultimately succeed because of the engagement and support of your team, employees, and customers. They need to understand – from you – why change is needed; believe in the vision of the future you paint, have confidence in your plan to get there, and be excited about their part in the journey. No matter how good your plan, resources, programme coordination and communications, these will never be enough: Your role as a leader is crucial in actively, and openly helping those around you maintain focus and momentum, and drive away fear and uncertainty.