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M&A Buyer: Integration is Inefficient

During the integration process, inefficiency can be as much as 50% for employees and constituents affected by the transaction.  If you have an annual payroll of $24 million, you may be incurring inefficiency costs of as much as $1 million per month.  These costs are hidden costs, since they often do not arise as incremental spending, but rather unaccounted for waste.  Worse yet, you will be potentially exposing the Company to frayed relationships with customers, vendors and other constituent’s that could impact the Company profitability and cash flow. Think about the turmoil during such a transition process… employee and outsourced resources may lack clarity about any changes in duties and responsibilities, internal reporting relationships, external contacts and relationships, tactics and strategies to be executed, negotiations in process, compensation and fringe benefits etc.

As the integration planning begins, identify the challenges that will be encountered by the constituents and prioritize them based on the expected impact on the integration process.  Anticipate and resolve the issues in advance whenever possible.  For example, compensation and benefits will always be top-of-mind for employees, but they will also be concerned about new duties and their perceived performance during transitions.  Customers will be concerned about in-process negotiations, existing orders, future pricing and terms, and linkages to key employees. Anticipate their questions, publish information that will resolve the major issues as soon as possible, and build a schedule of checkpoints for each major item. 

For example, in the case of compensation, publish known facts and a timetable for other transition items not yet resolved.  It may be very easy to state that direct compensation and commission plans will remain the same with the new company, and health care benefits will remain identical for – e.g. 60 days – with more information to follow within two weeks.  Then publish final information within two weeks. 

Occasionally some acquisitions have common customers among the buyer and seller companies.  Once again, anticipate the questions; publish known information and state deadlines for other matters.  Quite often with existing customers, in-process negotiations, existing relationships, contracts and procedures may cause customer angst. Your competitors know this and will take advantage of the opportunity to poach your customers.

You will seldom anticipate all of the constituent’s concerns. To avoid major problems, provide an open communication channel with established communication’s links (e.g. familiar and trusted management contacts that can effectively respond to queries) using emails, web sites, scheduled and impromptu meetings, and blogs.  Speed and accuracy in such matters is critical … and removing the unknown will eliminate distractions and improve efficiency.

In summary:

  • Anticipate questions, tell what you know, and admit what you don’t know.
  • When you don’t have information, make a time commitment to deliver the information, and meet the schedule.
  • In all cases, have a trusted communications network to communicate outward, and also listen. Establish inbound communication lanes (contact names, websites, blogs etc.) to capture any issues - early in the integration process is best.
  • Establish closure timelines for all segments of transition… e.g. all employee issues to be resolved within 30 days… customer issues within ‘X’ days… and meet those stated goals.
  • Understand that your competitors will take advantage of your turmoil and poach your best employees, customers, and vendors at their earliest opportunity..