BACKGROUND: Post-acquisition business integration should be considered from two aspects: (1) the integration of human capital; and (2) the integration of operations and systems. Although both are interrelated, Human Capital Integration has an emotional component which if not addressed with a reasonable degree of forethought and compassion, can quickly poison the relationship between the employees of the target and the acquirer’s management. Operations & Systems Integration should run in parallel with Human Capital Integration and includes the more mechanical melding the target’s internal business practices with those of the acquirer so that functions such as communications, financial reporting, ordering, invoicing, manufacturing/service processes, security, policies and practices operate in the manner that the acquirer intends. This “melding” may range from maintaining the target’s status quo to a complete replacement of O&S, extinguishing this aspect of the target’s corporate identity though the wholesale installation of the acquirer’s O&S.
ADVANCE PLANNING: Effective business integration does not begin on the day the target is acquired. It must begin at the earliest possible stage of pre-sale due diligence. When the likelihood of deal completion becomes reasonably certain, this is the time to move integration planning forward. Granted this timing is more art than science and may be for naught should the transaction not close; however, to wait any longer enhances the likelihood of an unhappy marriage of the businesses.
Select an Integration Manager – Skills: Planning, Credibility, Integrity, and Communications. The “IM” must be involved with due diligence at a very early stage – to learn the target business and its culture. Reporting should be at a very high level (CEO, Executive Sr. Management, Board) to ensure respect and gravity.
Select an Integration Team – The “IT” needs to have the correct disciplines represented: Accounting, Finance, HR, IT, Legal, Payroll, Sales and Manufacturing. It’s important to have members from BOTH SIDES of the transaction as soon as that is feasible.
Decisions to be Taken Prior to Acquisition – Need to consider how the target’s employees are going to be impacted from a job, reporting and compensation/benefits standpoint:
1. Determine new business organizational structure
2. Determine new leadership and other human infrastructure issues, including reporting relationships
3. Assess if all or any part of the target operate independently
4. Determine compensation and benefits structure and how this will change for target’s employees
5. Identify stayers and goers to the extent possible
6. Determine employee exit arrangements
Not all employee-related decisions can be determined prior to closing. Often employee performance and compatibility can only be evaluated through post-acquisition observation. Hasty human capital decisions can breed contempt. At the same time, dissent and incompatibility cannot be allowed to fester. The human capital component of the Integration Team should therefore move in an expedient and even handed manner.
Need to consider the extent to which the target’s Systems & Operations will be retained and conversely, the extent to which the acquirer’s Systems & Operations will be installed:
1. Assess the adequacy and compatibility of target’s S&O with the acquirer’s
2. Identify which of target’s S&O will be retained
3. Identify which of target’s S&O will be replaced or absorbed into acquirer’s S&O
4. Consider implications of these changes to staffing and reporting
5. Set out a preliminary timeline for each change
Processes to be Developed Immediately Prior to Acquisition – These must be ready for launch upon the day of acquisition:
1. Communications Plan: Q&A Forum; Point of Contact, Communication Channel, Q&A vetting process that is expedient yet accurate and consistent
2. Anticipate Q&A and vet matters in advance – brainstorm with all disciplines
3. Overall Integration Plan by discipline, line of business, grouping or other as applicable
4. Integration Time Line by functional area
5. Consistent, transparent process for making employment-related decisions (retention, promotion, open positions, compensation)
6. Handling of layoffs resulting from business consolidation, redundancy
IMMEDIATELY AFTER CLOSING – START OF THE 100-DAY INTEGRATION PERIOD
Communication, Communication, Communication – Implement your pre-ordained Communications Plan, which should include the following:
1. All-Hands Meeting – Announce the known, definitive decisions now; disclose the lines of communication for unresolved, open or unanticipated questions and Integration Time Line.
2. Written communication affirming what was disclosed at the All-Hands Meeting. This will avert confusion and dispute and reach those who did not attend.
3. Mind Reader’s Communication – Set out anticipated Q’s with definitive A’s in writing.
4. Regularly announce decisions as they are finalized through a consistent communication channel and/or updates. Regular written communication builds confidence and community.
Questions that Absolutely Need to be Answered Quickly & Consistently – Timing of responses will be dictated by need and certainty:
1. Am I going to have a job?
2. How will my benefits be changed?
3. Who will I be reporting to?
4. What are the culture, expectations, and objectives of the new owner?
5. What are the positives of this acquisition for me?
6. If I’m going, what help (severance, outplacement assistance, etc.) will I get?
Not all news delivered after the acquisition closing date will be good news for employees. It is best however to deliver bad news as early in this process as possible so employees can adjust to it. In addition, indecision, decision reversals or inconsistent messages damage credibility at a time when the need for credibility is paramount. Employees appreciate directness and honesty, even if the message is adverse. If a mistake is made, it is best to admit it, apologize and move on. Clear, concise communications will serve to squelch rumors and innuendo.
ONGOING MAINTENANCE: Business integration is a continuous process throughout the 100-day period. Members of the Integration Team should meet regularly to assess progress and readjust go-forward activities. These meetings may be among particular disciplines; however, to retain a solid perspective, the whole Team should assemble periodically for collective updates.
A periodic Integration Newsletter (or other means of formal communication) should be distributed among employees addressing submitted questions, clarifying any prior communications, dealing with misinformation, encouraging dialogue and documenting successes. This might be done weekly and later monthly as the process winds down. As previously noted, this communication needs to be controlled by a single point of contact to avoid inconsistency or mixed messaging.
CONCLUSION: Ultimately it will be important to announce the formal end of the Integration Plan. This announcement tells the employees that changes are complete, allowing them to focus solely on the future of the business. Be sure to thank your employees for supporting a successful integration program. The Integration Team needs to be formally disbanded at this time. Rewards for their good work should be considered. Remember, they have been implementing the Integration Plan in addition to doing their normal jobs.
