Integration is the process of consolidating two or more entities involved in a merger and acquisition.
Contrary to popular practice, integration is not a ‘step’ to be deployed once the final contracts have been signed and the deal finalized.
Integration is as critical as any other core aspect of an M&A transaction and should be approached with the same attention from the onset.
To shed light on integration’s pivotal role in the success or failure of a merger and acquisition, we interviewed the author of Now What?: A Survivor’s Guide For Thriving Through Mergers & Acquisitions, M&A human capital expert Jennifer Fondrevay. Here are some of her top integration tips.
Integration Tip #1: Engage a human capital advisor
If you’re thinking of an M&A, regardless of whether you’re the buyer or seller, one thing is sure: You need to consult with a human capital advisor.
“Why?” you may be asking.
Because an experienced advisor will get you thinking about all the Day 1 integration aspects you may be overlooking. They’ll probe you with leading questions dealing specifically with the employees and key talent.
Takeaway: “If you don’t start talking and thinking of the people, what will happen is you’ll lose major talent, suffer decreased productivity, and potentially miss your year one valuation goals.”
Integration Tip #2: Don’t blindside your employees
The very nature of M&As makes communication with employees complex.
There is a lot of secrecy because of confidentiality and compliance reasons. Executives often wonder when the right time is to tell employees so as to soften the blow and subsequent shock.
Because job security is a top priority for many employees riddled with mortgages, student loan repayments, and other financial responsibilities, news of a potential M&A can leave them feeling anxious and insecure about the future.
That’s why you’ve got to start communicating with them immediately after the deal closes and you should have a platform to regularly communicated from that point forward.
Takeaway: “Business is based on trust. When you have employees who trust one another, you can do great things.”
Integration Tip #3: Find out how the cogs work
When M&As typically occur, decisions are made by the higher-ups. There is little to no input from the people who actually do the work on a day-to-day basis.
A bottom-up approach is needed to give insight into how the business actually works and how it can be successfully integrated or merged into an existing one as seamlessly as possible.
Who are the key people, the indispensable leaders, the cogs in the machine? By working with a human capital advisor, buyers can find answers without disclosing and alarming employees.
Takeaway: “Having a line of sight on what the frontline leaders are doing and how they work is important.”
Integration Tip #4: Timing of employee surveys is everything
Surveys and focus group sessions in order to determine cultural fit and overall employee satisfaction at the current company are important considerations, but timing is everything.
They’re not typically the first order of business and shouldn’t be left to the last minute either. So when is a good time to start conducting human capital due diligence?
While there is no ‘ideal’ time, a moment that’s preferable is after you’ve hit a couple of milestones – the basic due diligence has been completed, the financial diligence too, and when everything is pointing towards a positive deal outcome.
Takeaway: “You have to be aware…and be prepared [if you allow the surveys to take place]…if the deal doesn’t happen now you’ve got employees wondering, “Our leader was thinking of selling the company or acquiring another. What does that mean about my job?”
Integration Tip #5: Empathy must lead during post-COVID integrations
COVID has changed the business landscape and now we are seeing more distributed workforces than ever before. It’s certainly a time where leaders need to lead with empathy and not make demands from employees that they themselves are not willing to abide by.
Open, consistent, and transparent communication must take center stage.
An empathetic mindset is what is needed among executives approaching M&As in a post-COVID era.
Takeaway: “The more you open up to your employees and talk to them about what you’re facing as a company, the more you are all going to feel like you’re in this together.”
The Bottom Line
People want to be seen, to be acknowledged, to have their work validated.
By opening up communication and being transparent in so far as confidentiality agreements allow, and assuring employees of job security, Day 1 will potentially be a lot smoother than what we’ve witnessed with other mergers and acquisitions.
If you’d like to discuss integration in more depth, our team of seasoned M&A advisors is only one phone call away.
Sun Acquisitions boasts an experienced M&A team that can assist you with preparatory efforts whether you’d like to buy or are selling a business. Don’t hesitate to contact us.