The U.S. just experienced the most active first half of a year in over a decade for middle-market M&A transactions, with 5,260 deals completed. As more and more companies realize the potential value of mergers and acquisitions, the number will likely only continue to climb. However, as the high number of failed M&A deals in 2016 showed us, not everyone is adhering to the best practices that can make or break a deal.
In our experience at Symmetrical Investments, one of the primary aspects of the M&A process that impedes success is integration – partly because integration is not a “one-and-done” step. There are three major phases to a proper integration plan.
1. Pre-offer analysis
2. Setting the course
3. Post-merger announcement and the first 100-days
Read on to better understand each phase, and how an M&A advisor can help you facilitate a successful deal.
Pre-Offer Integration Analysis
Many companies are now focusing on integration much earlier in the M&A process than in previous years, and that’s a good thing. In fact, you should start laying the groundwork for the integration process long before a deal is ever announced.
The first step you should take after selecting a potential acquisition is to form an integration team of decision makers who will be highly involved in the entire acquisition process. Their job will be to analyze potential acquisitions and make recommendations about how to proceed, starting with a strategic and cultural compatibility analysis.
Strategic compatibility refers to the level at which the two involved companies have similar management structure, administrative processes, resource usage/leverage, customer base, and financial management systems. Cultural compatibility refers to the level at which the two involved companies have similar management styles, values, demographics, geography, and overall attitude.
With an understanding of the synergies between the companies, you can then decide on the level of change needed and speed. Consider the backlash that may be caused by both. There may be employee resistance to a large degree of change or a lack of attention to detail if it is done too quickly. When deciding how to move forward, focus on a formula that minimizes the redundancies between the two organizations, keeps a steady momentum of positive change, and reduces uncertainty among all stakeholders.
Setting the Course
By the time you’ve completed the initial analysis, you should be working with your M&A advisor on preparing an offer, and should take additional steps to prepare for the anticipated transaction.
First, set the course by communicating with your stakeholders and make them feel involved in and assured by the process. Get buy-in among your leadership, so that they can prepare to align with the potential acquisition from the top. Engage your employees to make sure they are ready for the potential changes that lie ahead.
Second, start to create detailed planning documents. Your integration team, including your M&A advisor, needs to formulate your day-one post-merger plan and your first 100-days post-merger integration plan. These plans will serve as a roadmap for every aspect of integrating the two organizations, based on your initial compatibility analysis. Your team should also begin drafting a corporate policy integration plan to ensure that the new organization will have a pre-existing structure codified once it is formed.
Post-Merger Announcement and the First 100 Days
Now that you’ve made an objective analysis, started to draft integration plans, set the course from the top down, and communicated early, you should be preparing to sign the agreement and make the grand announcement. It’s time to execute.
Few days matter as much in the M&A process as day-one post-merger. You can set the tone for a successful merger across the board by starting out with a clear plan for how your company is going to look and act from the start. Corporate leadership should lean on the integration team and the roadmap they created in order to hit the ground running.
Finally, carry out your first 100 days plan, which your integration team created during the planning phase. The experienced team at Symmetrical works directly with the integration team and leadership to help keep the momentum going and ensure that you stay on course.
From day 101 and beyond, the integration should be a self-fulfilling prophecy. With a good plan, your new organization can become a shining example of corporate synergy, leveraging each company’s efficiencies.
If you’re considering a merger or acquisition, it’s in your best interest to get started as early as possible. Here at Symmetrical, we are committed to helping your company identify and secure the best deal it can and integrating as efficiently as possible. Contact us today to get started.
Succession planning is the process of identifying and developing new leaders to replace current leaders when they leave or retire. This is crucial for all businesses, but especially for family-owned businesses, which typically need to consider the family legacy and values they want the company to sustain in the future.
Succeeding with Succession
Family-owned businesses may hesitate to plan for the future because they are uncertain of how the interests and decisions of family members will play out over the years. However, effective succession planning will mitigate any uncertainties and set the stage for a successful transition.
Succession planning should be a strategic process, and it should start with an evaluation of the company’s current state and then with an outline of its desired future state. To begin, the leadership team should define and address the company’s goals and potential challenges. With those in mind, they should then identify the qualifications and expertise needed to meet those goals and deal with those challenges. It will then be easier to evaluate potential candidates for the role.
A Succession Journey
The next step is to seek out and prepare a list of the potential candidates. Family-owned businesses should consider options that will preserve family ownership but that also meet the needs of any shareholders, trusts, or foundations. After all options are explored, it’s time to create and execute an actual plan. With a formal plan in place, leaders will be able to more easily manage the transition and focus on the future of the company.
There are many decisions regarding the future that should be kept in mind while planning. Who should lead the business? Who should own the business? What are the common values the company needs to preserve? How should the wealth transfer? Family-owned businesses should develop answers to these questions to properly plan for the future. Seeking help from an advisor will make the process more manageable. Our team of advisors at Symmetrical can guide you through the succession process and explain the role it plays in future success. Contact us today for more information.