The post-merger integration of employees and cultures is vital to the success of any M&A so it’s important to prepare staff and make a plan to avoid the “us and them” mentality that can sometimes arise when doing a major deal like this.
Parties involved in M&A often see the transaction as being completed when the legal documents are signed but in reality this is only the beginning, says Katharine Byrne, corporate finance partner at BDO.
“The first hundred days are really critical to the success of the transaction, especially when companies are trying to merge two teams or cultures. This takes careful planning and can often be overlooked in the depths of due diligence or flurry of legal documentation, when the focus is to get the deal over the line,” she says.
Effective communication plans are key in terms of getting people on board, aligning them with what you’re trying to do and showing them what your vision is for the combined businesses.
There are many general concerns among employees, says Jan Fitzell, mergers and acquisitions partner at Deloitte. "Concern for their job. Is there a role for them in the future? Then there is the cultural piece: are they going to align with what the new business is looking to do into the future" he says.
“We advise our clients the detailed planning for the successful integration of an acquired business needs to commence early in the transaction and mapped out during due diligence as this is usually when key members of the management teams are interacting with each other,” Byrne says.
A well-thought-out and proactively managed integration plan should cover several areas.
“As part of the assessment to acquire the business the reasons why to buy or merge are defined at the outset. This needs to be translated into a shared vision and communicated to all interested parties in the business. It is critical to win the hearts and minds of the management team of the integrated business and the confidence of the employees,” she says.
“Managing the integration of the culture of separate businesses can be a significant challenge and securing buy-in from staff. We advise our clients to be clear and transparent in their communications with staff by addressing the key question “what’s in it for me?” Will there be increased opportunity in the integrated business. Is there potential for financial reward.”
Many Irish midmarket companies will not have the in-house resources or expertise to effectively plan and proactively manage the delivery of the integration. Therefore it may be necessary to seek external support and buy in this expertise to support the management team during the transition phase.
“A number of acquisitions are based on capitalising on an opportunity to deliver synergies and cost-savings. Often companies underestimate the extent of integration required in order to streamline the activities of two separate businesses,” Byrne adds.
Therefore, Fitzell says, being “overly optimistic and too ambitious” with the business you’re acquiring sets you up for a fall.
“Being realistic and not being too aggressive in terms of your assumptions” is one to look out for from both the buyers’ and sellers’ perspective.
“It’s important to meet with the management team as the deal is progressing and understand what their vision is for the future. As a buyer you’re going to discover a lot of things about the business during due diligence, things you’d like to change in the future, or putting in new additions to the management team. Are you going to look at launching into new markets, so you’re coming up with an immediate 100-day plan and then a longer-term plan. If the management team don’t agree with your strategy it’s going to be hard to execute all of that,” he says.
And when all is said and done, simply meeting for “coffee, dinner, drinks” at the early stages to see if there is a cultural fit and that these are people you would be able to work with in the future is always a good call, he concludes.