Coming Together As One
Before a deal closes, your acquisition team should already be thinking about how the two companies might work together. This includes developing plans to align the cultures of the two companies and making the most of the first 100 days after the sale.
As author Stephen R. Covey points out, one of the seven habits of successful people is to begin major projects with the end in mind.
Plan for Cultural Alignment
If you don’t start thinking about cultural alignment before the sale closes, time-consuming conflicts are likely to derail the critical first 100 days of the post-sale transition. And without a smooth post-sale transition/integration, it might be difficult to achieve your strategic objectives and anticipated financial gains.
During a podcast produced by DealRoom, CEO Kison Patel spoke with Kim Jones, senior HR M&A Manager at Microsoft about how Microsoft’s acquisition team identifies early signs of a bad fit and accommodates the target company’s culture.
Jones said Microsoft starts thinking about company culture when they get approval to negotiate or when they know they are going to get an LOI signed. The target company’s culture plays a role in how the deal will be structured.
“We are constantly having conversations about what we are trying to accomplish with a deal and we talk about deal value drivers and talent,” said Jones.
Here are some good ideas from that interview.
Assess how the culture of the target company differs from your company. Identify potential culture clashes, gaps, and risks. For example, working for a small, fast growing start-up with a “get-it-done” mentality is fundamentally different from working for a global corporation with multiple divisions and branches. Employees of the acquired company often resist having to report to additional layers of management or having decisions reviewed by lawyers or financial managers.
Find ways to accommodate and foster the target company’s culture. After learning about what’s important to the target company’s employees, Microsoft’s M&A team looks for ways to fund aspects of the target company’s culture so they can initially continue to feel like they have those connections. The goal is to continue to foster the innovation that is expected when bringing new leaders and employees in the bigger company.
“Our culture is such that we don’t ask others to align with us, but instead, we learn together and try to figure out how to move forward,” explained Jones.
Identify what role the current CEO will play and what he will communicate to existing employees. Will the CEO be retained for a few months solely to lessen the fear of the unknown among employees? Or will he be able to take on more responsibilities within the bigger company?
Identify which employees you most want to retain if the CEO chooses to depart. When the existing CEO leaves, some employees regard it as an opportunity to consider other options.
To get a fast start on post-sale integration, you can’t afford to waste time dithering. You need to know on the first day after the sale how you want your integrated organizations to function as a unit.
Make the Most of The First 100 Days
The post-sale integration process can be managed like any other business transformation process. If the merger brings fundamental changes to organizational structures, operations, or company cultures, it’s critical to consider what you will focus on during the first 100 days after the deal closes.
Boston Consulting Group experts shared insights from a study of 3,000 transformations ranging from business model shifts and digitalization to restructurings, explaining why the first 100 days can make or break a business transformation. The post summarizes four areas of early focus for companies that rated their transformation a success: (1) declare the transformation a top priority; (2) rally the top leaders; (3) organize and mobilize; and (4) broadcast and engage.
In my experience, these four practices can also be useful during the post-sale integration process.
Declare your commitment to a smooth transition. A merger creates uneasiness for employees at all levels. Some will resist change, others may make demands,
Everyone will wonder: How does this merger affect my career? Ease employees’ concerns by presenting a clear and unified message about some of the actions that will take place over the next three months.
Explain that the merger is about more than money. It’s also about gaining the resources needed to advance some of the company’s other goals such as expanded innovations and employee opportunities, growth in new markets, or more sustainable operations.
Rally the top leaders. Make sure all influencers within your company will be actively supporting the process. The integration process gets bogged down when a few disgruntled employees spread rumors based on inaccurate information. You want the process to focus on the positive, and not get diverted with damage control.
Organize the process. Set up a group to oversee all tasks, information, and activities associated with the integration process. This group can serve as an information clearinghouse for anyone with questions about the status of specific initiatives.
Map a communications strategy. How will you communicate to all employees affected by the merger? How will you communicate individually to everyone affected? What message will you give to those who are leaving the company and those who are staying? How will you communicate to employees who are taking on new responsibilities? How will you collect and monitor feedback?
Tell Me More
At LaManna Consulting Group, part of my job involves teaching first-time business sellers about what to expect during and after the M&A process. Well-educated sellers are better prepared to meet some of the milestones during your timeline for closing a deal.
What types of practices do you follow to help ensure the success of the post-sale integration? How do you evaluate a target company’s culture?
Call me at 561-543-2323 and tell me more about how I can help sellers better envision the successful end of an M&A project.