Companies with an ambitious merger and acquisition record may deliver higher returns for shareholders. However, the returns evidenced on paper will not become a reality without a successful integration. This is where the value is created, the crux of an M&A plan.
The business law professionals at The Hakim Law Group want the business leaders in the Los Angeles area to recognize integration as a skill set, not as another process in an M&A plan. Integration is unique to each merger; it takes skills to implement the strategic vision specific to the deal. The integration plan, and the budget to implement it, begins at due diligence. This article identifies ten areas where an M&A team must expend their time and resources to create the projected value.
The Successful Approach
It is our experience that when the areas identified below are a part of the M&A team’s focus, a successful integration and a profitable merger is more likely to result.
1. Integration is Integral to Due Diligence
It is always too late to focus on integration after the closing. We advise using outside-in data to be the most productive during the due diligence period. This approach identifies latent needs within the customer base and the appropriate teams that need to work to meet them. The outside-in approach goes beyond the culture and talent within the companies. The better the customers are served, the better the talent develops within
2. No Form Checklists
Every successful merger has an integration thesis created in the due diligence window. Many M&A plans fail to hit the projected targets because companies sell their talents short by expending resources to only the low-end targets identified during the proforma phase. Another misstep is approaching integration like a “check-the-box” process. Each move during integration must conform to the strategies and value potential that justified the M&A deal.
3. Delivery Through AI and Analytical Software
All value-driven decisions need the data produced by analytical software and AI. These programs can rapidly compare data across companies, identify and analyze culture gaps and risks, and develop new job descriptions. This is the step where synergies are measured. It is crucial to use technology platforms specifically developed for integration. Companies that repurpose project management software for integration data analysis will not find synergies nor achieve the target value of the M&A. The analytical tools cannot be based on one company’s inputs
4. Prepare Layered Closing Scenarios
In today’s regulated climate, M&A deals take longer because of regulators’ scrutiny. The best plan to overcome these delays is to allow more employees to focus on the base business. Only a small group of leaders and third-party clean teams should focus on an accelerated plan to capture value. The company’s teams can be deployed when the regulators have cleared them, and the appropriate assurances are in place.
5. Deliver on Pivotal Decisions
Revenue generation and cross-functional talent are two pivotal decisions identified during due diligence. If separate sales teams have an opportunity to cross-sell products or services during the integration process, then delivering on this opportunity is imperative. These functional decisions will set the path for integration and maintain revenue flow. Pivotal decisions will vary in each deal, but often, the cross-functional decisions of the two companies during the integration process are vital. This is not a task for one team to implement.
6. Go Beyond the Project Manager Mindset
Companies and teams with M&A experience know that integration cannot be approached with a “project manager” mentality where teams are supervised to create and deliver work plans.
Integration is strategic and moves across companies. Teams must be cross-functional, and all team members must understand the deal’s value and their part in it. Interdependencies must be managed, and priorities must be aligned.
7. Power vs. People
All new merged organizations need to select personnel from both companies who are talented, enthusiastic about the merger, and can contribute the most to it. These tough decisions must be made early, and top positions should be filled first. The more time it takes to make the “people” decisions, the harder and more personal they become.
8. Find Culture Fault Lines
Fault lines, or destabilizing differences, in the companies’ cultures will inhibit value. On the surface, these differences appear as mere annoyances. However, these can grow into hostility in the workplace—the opposite of what creates value. The integration team must go beyond employee surveys to identify differences. When frictions become known through the surveys, they must be addressed. Companies can succeed with in-person visits and workshops, where positions and issues are heard and acted upon. Any action promised at a face-to-face meeting must be followed up. Communication is key to smooth over any misunderstandings and rumors. In these situations, proactive measures must be taken to avoid unwanted attrition. Both companies want their critical talent to remain.
9. Revenue Synergies
Revenue synergies must be realistic, and failing to recognize and act on them is the common cause of a failed M&A. It is a coordinated effort involving customers and products with a clean team to train and incentivize the cross-teams and operations. These efforts should be taken before the closing. The cross-team selling and marketing strategies will help justify the M&A deal to the customers and sales reps.
10. Invest in the Integration Model
M&A drives growth and market share. However, company leaders must take the risk of early investments into the integration model to achieve a successful and profitable merger. These early investments must be made to achieve:
- ultimate capabilities,
- aligned objectives between the board and management,
- a network of trusted advisors,
- flexibility across product lines, and
- training of sales and marketing teams pre-closing.
Interested in Learning More About M&A? Contact A Highly Experienced Business Attorney in Los Angeles Today
A is risky, but the rewards are high if integration is approached with the vision of creating value. There must be a willingness and tolerance for risk to invest in the plan and the people pre-closing.
The goal should be to beat the projections and bring value to the shareholders. This achievement will be accomplished when there is belief and support in the integration from the top and resources are invested early.
If you are a business leader in the Los Angeles area who utilizes M&A for growth, you need the experience of a law firm specializing in this area of law.
Our team of highly skilled and reputable business attorneys have worked at top-tier international law firms and served as general counsel to major companies. This high level of diverse legal and business experience is paramount to our boutique approach.
For additional information or to schedule an appointment with a business lawyer in Los Angeles please contact The Hakim Law Group at 310-993-2203 or visit www.HakimLawGroup.com to learn more.
