Post-merger integration
How to properly integrate an acquisition and what to look out for
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“The deal is closed, now the real fun begins”
Post-acquisition integration is just as critical as properly underwriting and closing a deal. From a buyer’s perspective, if problems arise with integration that is a telling sign that issues lay ahead.
key reasons why M&A integration fails:
Lack of alignment: Focusing on closing a deal without properly understanding the complexities of integrating a business can lead to headaches for both the buyers and sellers. It is important in the final stages of due diligence to properly plan out the post-close integration strategy and the key activities that come with this process. This could include:
setting up new bank accounts
integrating employee payroll
registering with local tax authorities
informing employees & customers
Poorly conducted due diligence: This is another major reason why M&A integrations fail miserably. Whether it is an inexperienced deal team or time pressures causing a sped-up process, there are many areas for red flags to be missed. It is vitally important for the deal team to not get overconfident with underwriting and to know when it’s time to step away from a deal. There is a lot of time that goes into conducting due diligence and the last thing an investor wants is to step away. The hard truth- sometimes it needs to happen.
Cultural issues: There should be an added section of the due diligence process named “cultural due diligence” as a lack of cultural fit can cause an integration process to fail miserably. It is important to understand the culture that a management team has created and to ensure that they have an understanding of the culture changes that you plan to implement as the new business owner. Cultural issues stem from the management team so it is vitally important that you are properly aligned on this front.
TLDR: Don’t overlook this tedious process and the quicker teams plan for integration the better.
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Good tips and insight. A friend of mine wrote a book that might interest you, addressing the post-merger culture failures and how to avoid them or fix them. It would be a good gift for your clients! https://jenniferjfondrevay.com/now-what-by-jennifer-fondrevay/