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November 22, 2022 5 minute read

M&A Integration Best Practices: Successfully handoff M&A Due Diligence to Integration

M&A integration is a crucial step most companies need help getting right, and the handoff from due diligence to integration a vital to overall deal success. Melding two different companies, leadership styles, and corporate structures creates an intricate web of complex interdependencies. 

According to PwC, “Companies who do not follow a disciplined approach to integration usually aren’t as successful with their deals as those who do.” 

You must have a meticulously planned execution strategy in place from the start and maintaining the momentum until Legal Day One (Day 1) is crucial to achieving successful integration.

Early Planning is Key

Bain & Company states: “The acquirer should begin planning the integration process even before the deal is announced.”

The ability to fully realize deal value and ensure success depends on how quickly and well the integration is executed. A key priority is to deliver shareholder value at the earliest through a rapid transition process that generates bottom-line results. 

Early planning, is vital. Focus on: 

● Installing the right people to manage the integration 

● Defining a strategy focused on continuous value realization

● Creating a process map to align accountabilities and measure progress

● Using the right tools in the form of supportive technology

Install the Core Integration Management Team 

The integration process takes months and, sometimes, years. Have the right leaders at the helm to ensure a successful conclusion to your integration plan with minimal disruption. 

Select leadership talent with competencies in strategic management and complex change management. The most effective integration methodology is to deploy an Executive Steering Committee and an Integration Management Office (IMO). 

Ernst and Young (EY) define the IMO as the “managing body of the integration and is responsible for simultaneously defining the integration strategy with the executives, establishing the program road map, communicating and upholding the guiding principles of the integration, and managing and resolving functional or cross-functional issues, while diligently working toward achieving the deal’s value drivers.” 

The Executive Steering Committee consists of senior leaders who provide insights and oversight. 

One of the most important functional areas to bring on board is Human Resources, which will be involved in:

● Providing perspectives on the purchase agreement, due diligence, risk mitigation, and identifying people-related costs.

● Driving employee engagement, policy, and retention strategies. Also, talent management, productivity, restructuring, and cost optimization. 

Also relevant is the inclusion of your M&A Due Diligence team. While the diligence and integration processes are separate, having due diligence input helps maintain continuity and streamline information gathering and sharing. You’re also bridging the gaps between diligence and integration to ensure a seamless transition from one stage to the other.

Define the Integration Strategy

McKinsey states: “The integration of an acquired business should be explicitly tailored to support the objectives and sources of value that warranted the deal in the first place.”

The integration leaders will work with the deal execution team and the executive steering committee to understand key value drivers and convert these to tangible goals. The goal plan is then filtered to functional experts of the various sub-departments to guide their action plans. 

In addition, mission-critical for successful integration is the ability to agree on the company culture to be adopted, whether it’s the acquirers’ or the targets’ or a synergistic amalgamation of the best practices from both sides. The leadership will then need to make concerted efforts to embody the culture and commit to empowering junior leaders to do the same.

Create a Process Map

A process map is a step-by-step plan of how you will achieve integration, including all the people, processes, and systems involved, along with detailed timescales. It identifies stakeholders, assigns accountabilities, and sets milestones.

A process map is essential to instill confidence among stakeholders and employees, aside from the core goal of creating a clearly defined pathway for success.

As soon as the deal is closed and your process map is set up, you want to instill confidence among other key stakeholders. Your own employees, customers, shareholders, unions, etc. Communicate to them in a positive tone the reason for the deal and what to expect going forward. 

Prompt and confident messaging helps to assuage fears and uncertainties, especially among employees concerned about how they fit in with the new structure. 

Next, get the buy-in of all the functional heads, such as HR, IT, Finance, Payroll, and so on, and establish how they will integrate within the plan. 

Another key aspect of process mapping is developing Key Performance Indicators (KPIs) and redefining and readjusting these as you move through the process. Only some things will be transparent or visible at the early stages. The processes should all fall into place once the integration leaders have had a chance to get their feet wet and make sense of how they can provide value. 

The creation of the process map, like all other action steps, begins as early as the deal announcement stage. 

Deal Announcement Stage

The deal announcement stage is ideal for creating your process map and kicking off your integration strategy. At this stage, you’re:

● Defining your integration strategy and articulating your quantified objectives, including the desired Day 1 state. 

● Identifying management talent for the steering committee and your integration teams (IMO).

● Developing a 100-day integration plan with several smaller (but significant) goalposts to inspire stakeholder confidence. PwC, in their publication, Seven fundamental tenets of successful integration, refers to the 100-day post-deal closure phase as a critical time phase for integration.

● Planning for resource allocation and other holistic drivers such as culture fit.

● Ensuring you have a water-tight communications plan to ensure all the teams are strategically aligned. 

Deal Closure

At the deal-closure stage, you’ll begin the tactical execution of your integration strategy. You’ll also assess performance and readjustments to ensure all M&A integration activities are on track. At this time, you start to deliver on the promise of some quick wins to keep the momentum going and mitigate uncertainty and potential risks.

The 100-Day Execution Plan

During the 100 days post-deal-closure, you’re working on ensuring that the maximum value is extracted from the integration process. Your time will be spent tracking integration activities and managing performance leading to a successful Day 1 kick-off. Having the entire pre-deal, at-deal, and post-deal strategy in place early on will ensure the best possible success while executing your M&A strategy. 

When done right, an M&A integration can “deliver as much as 6 to 12% points higher total returns to shareholders(TRS) than those that don’t,” according to McKinsey.

Use the Right Technology and Tools

Given the inherent complexities of M&A integrations, having tools that help you manage the complete end-to-end process of an M&A is necessary. 

The right M&A platform can streamline integration by aligning your teams, enabling dynamic deal and progress tracking, and motivating teams with best-in-class project management tools. Devensoft is a full-fledged M&A solution for corporate development and integration teams that’s user-friendly, intuitive, and, more importantly, effective. 

Speak with a Devensoft professional today to learn how to simplify your M&A integration management and start achieving your integration milestones.

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