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Mergers and Acquisitions Best Practice

Acquisition Integration: How to Do It Successfully

by David Sadtler

Making It Happen

  • Design the entire acquisition process to focus on the key drivers of value creation, and ensure that the integration process deals with each as a high priority.

  • Prepare a complete plan to action the four key areas—financial control, the introduction of new processes and systems, key appointments, and the pursuit of value creation—as soon as ownership changes hands.

  • Develop a cadre of specialists to speed the acquisition process so that operational managers can focus on the business itself.

  • Don’t delay. Move fast.

Other Factors That Contribute to Success

Finally, a comment about speed. There is widespread agreement among serial acquirers that moving as quickly as possible is best. It may be tempting to keep the pressure off the acquired organization, at least temporarily, because they have been through a demanding and possibly anxious time. But momentum can be lost, benefits delayed, and the acquired management team even led to believe that the acquirers are less than serious about achieving the projected financial benefit. Speed is best.

One major UK retailer got this one wrong. To its credit, it was quite clear about its value creation rationale for the acquisition, which was that of implementing its proven EPOS (electronic point of sale) systems in the acquired company. It saw from its observation of the company—and confirmed this during the diligence process—that introducing its technology would impart major operational benefit to the target company. Inventories would be reduced, stockouts would decline, and overall customer satisfaction would increase. But it delayed implementation, reasoning that steps to integrate the target into its organization and enabling the new employees to become comfortable in their new surroundings were necessary for good morale. Sensing a lack of commitment to change, the acquired company’s supply chain and IT specialists took the initiative to bolster their systems and make it hard for any subsequent changeover—along with the potential for staff reductions in the process. Operational integration was delayed for over a year and the financial benefits suffered accordingly. The corporate development director, who had been the project manager for the acquisition, commented that this was the biggest mistake in the entire process and that it would never happen again.

In larger organizations, and especially those that regard acquisitions as a key source of future growth and competitive advantage, specialists are often developed to perform the tasks of integration. Dedicated teams can reduce the possibility of delays of the kind described above. Smaller companies, and those with less experience, may not have the luxury of maintaining a dedicated staff, but if deals become a way of life, it is probably advisable that a specialized group be formed to capture the company’s experience and institutionalize emerging best practice.

Conclusion

Integration is a tough and demanding job, but one that frequently spells the difference between success and failure in an acquisition. The task must be treated as one of the highest priority and responsibility apportioned to the people best suited to doing it. If this is done, and if the four tasks enumerated above are handled quickly and effectively, the chances of financial, strategic, and operational success will be that much higher.

Notes

1 The major causes of acquisition failure are dealt with at some length in Sadtler, Smith, and Campbell, Smarter Acquisitions (2008).

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Further reading

Books:

  • Galpin, Timothy J., and Mark Herndon. The Complete Guide to Mergers and Acquisitions: Process Tools to Support M&A Integration at Every Level. San Francisco, CA: Jossey-Bass, 2007.
  • Sadtler, David, David Smith, and Andrew Campbell. Smarter Acquisitions: Ten Steps to Successful Deals. Harlow, UK: Pearson Education, 2008.

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