There’s a lot written for the buyer of strategic acquisitions and how to manage the integration process. However, there seem to be few articles or blogs focused on the seller and his/her team and how to navigate the integration process once closing happens. Having been on all sides of this process, including being the seller both as a hired-gun and as the principal, I know first hand it can be overwhelming and challenging to meld two companies.
Below are a few integration topics with my notes that may help you (as the seller or part of the seller’s team) work through the transition –
- Preserve Value – most acquisitions today are focused on some strategic theme or rationale, and have been valued accordingly. Common reasons to do a deal include access to customers, getting a good team or entering a new market. Both the buyer and seller want to preserve and grow the value of the investment, not destroy or impair it. For the buyer, it’s about integrating the company and achieving planned synergies and growth goals… and for the seller its about a clean hand-off, a valued legacy, meeting criteria to get paid for their earn-out, and wrapping-up the tail of the transaction and getting their escrow monies released. In few cases does the integration of company require immediate and wholesale changes… so a coordinated and sequenced plan is the norm. Many times the mantra is “do no harm to the acquired company” and give the benefit of the doubt to the seller’s team.
- Integration Plan – when the buyer is a larger company, there is typically a barrage of functional leaders and experts task with assuring integration and compliance with certain aspects of the business. For a relatively smaller acquisition, the corporate attention and demands can be overwhelming and sometimes detrimental to preservation of value mentioned above. Communication and a coordinated integration plan is key to protecting the acquisition and achieving a smooth transition. The post-closing leader of the acquired company (i.e. President, General Manager, etc.) needs to force the discussion and get agreement with the acquiring company’s leadership on the priorities and timing of integration activities; pacing and organizing those activities to protect and grow the value of business given his/her intimate understanding of the existing customers and employees. The last thing a buyer wants to do is blow-out the team and lose the institutional knowledge and relationships just acquired… and impairing the value from the start. Negotiate and agree on a doable integration plan that includes monthly priorities and assigned resources (both from corporate and from the acquisition).
- Agree on the Critical Few – there are typically a few non-negotiable changes that must take place with a defined timeline; agree on these first so you know the critical path. From there, most other integration activities are negotiable. Set ground rules for the process and get agreement that it’s OK to push-back when changes don’t seem to make sense. Once again, better to protect and grow the investment than force changes that destroy value.
- The Role of the Seller – if the seller is an active member in operating the company, get clarity around his/her go-forward role and timing; and communicate that transition plan to the team. Having personally been in this role, I can tell you that it’s an awkward time. Allow both the seller and his/her team time to process the transition and navigate the emotional loss and change of authority. Focus on the high-value contribution of the seller to assure successful integration, while enabling the buyer to lead and grow-forward. Both the buyer and seller need to keep in mind the deal-transition given the post-closing monies at risk for the seller (escrow, earn-out and other contingent payments) and establish a way to optimize the contribution of the seller to achieve the strategic goals.
- Agree on Success – arguably I could have put this bullet first. For both the buyer and seller, fast-forward a year from closing and agree on the handful of metrics that will determine success. What will have happened so that both teams (then as a newly integrated one team) will be giving high-fives and being paid their bonuses. Make this list short and keep it top of mind as you navigate the daily details.