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The Challenge
One of the major challenges at our company is drawing a line in the sand when an element of integration is now ready for hand-off ( business as usual ), to the appropriate division. The primary factors, in my observation, are poor communication and competing agendas. Poor communcation is common across many business functions as a company scales ( we are about 800 ). The competing agendas is an area that I believe derives from the lack of proper support from the executive team for the M&A team.
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Some Examples
We recently acquired 5 companies over the past 2.5 years. Our team was new to this and did not have a formal M&A Team in place. The first acquisition was small and intentionally used as a learning ground knowing that the acquisition of the talent was justification enough for the acquisition as a whole. The following 4 acquisitions were larger in scale and varied from complementary proprietary technology plays, to simply aquiring clients through business acquisition.
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Small Acquisition
The first small acquisition allowed us to get our feet under us, and for the most part the acquisition was on the corner of a few desks. We did have a corporate development officer skilled at due diligence and deal crafting, but we lacked a complete integration team. Due to the simplicity of the deal, we were able to create a basic playbook, along with general alignment across teams on expectations. However, due to the simplicity of the deal, the complexity the M&A motions for a larger deal were not properly recognized, and that set us up for challenges in future deals.
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Adjacent Acquisition
Our next acquisition was about 5 times the size in value and 3 times in size with regard to people. Again, we had an edge-case acquisition, and this time the decision was mae to let the acquisition run as an autonomous unit. There was no need to integrate teams or roadmaps. The only detailed integration happened at the HR level, and the experience from the first acquisition helped in this area. So now, we had even further established a false understanding of how complex an acquisition could be.
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Product Integration Acquisitions
The next two acquisitions were substantial, and required deep integration of technology products and teams. We really felt the pain during this integration. Due to the fact that previous acquisitions had kind of “worked themselves out”, the individuals on the m&a team ( not dedicated employees, but simply allocating a portion of their time for m&a ) were overwhelmed.
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The Hand Off
So now we are 4 acquisitions deep, and we still have not head clear hand-off on some elements of the first acquisition. The lines were blurred due to poor communication, competing agendas, and separate understanding of ownership. The executive now realizes that the integration step is real, and can be very expensive if not properly attended to. For example, a large number of unnecessary and overpaid employees were kept for over 6months as a result of poor communication and hand-off.
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Next Steps
Working closely with some key individuals, I have brought some best practices from m&a best practices training, books, and peer groups ( including this one ). Our CTO is fully bought in and has written some very good sets of documentation to assist in the future hand-off during integration. The CTO is crucial at our company as we are a SaaS product enterprise. We still do not have a dedicated m&a integration team, but there has been meaningful discussion and thinking around the area, and it looks promising as we move toward yet another acquisition.
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Share Your Thoughts
I am curious if others have experienced similar challenges, and what your approach was to achieve success.Thanks for sharing Chris. Indeed, the hand-off is a crucial topic in my experience. And even more challenging when integrating an adjacent business, with different product lines, regulation, pricing, manufacturing strategy… How to ensure the acquiring company’s shared and global functions embrace the change and adjust their operating model accordingly? And as rightly pointed out, identifying the gaps is one topic, having them communicated and understood and is another one.
To give a practical example, we had to onboard and train our internal audit teams to explain that the acquired company has different inventory and bill of material management because of the specifics of their business. And consequently, the audit checks should have been enriched accordingly.Interesting observation Chris. I have seen this as well. My examples are primarily in cases where the “integration” task is for some reason delayed (often due to business reasons) and the BAU process owners are feeling stuck between the business and the IMO, even though they actually own the interim and permanent process and outcomes.
I found that keeping strong leaders of the workstreams engaged and accountable for their tasks and activities from the very beginning of integration was essential. When necessary, I had to intervene and have direct engagements with the business owners, but that was limited. My other suggestion is to have a hand-0ff to the business as a specific milestone or deliverable in the integration planning. This can be ceremonial with the process transferred, communication announcements of integration completed, and so-on so there is a real sense of transition.Hi Chris,
If managing the integration as a whole vs. managing one of the workstreams… here are some recommendations – assuming you’re seeking guidance as the Integration Lead.
1. What is the company’s strategy for organizing for successful M&A PMI? Think about the current issues – create a FMEA.
2. If you, as the Integration Lead, don’t understand the “hand-off” and accountabilities from the project to the operational organization,… I can ensure you, no one else will- a sure recipe for bad outcomes. Press for clarity – first for yourself,.. and later to share with others.
3. When leading an initiative, putting it rather bluntly, you need to ensure sponsors & stakeholders have at least as much skin in the game,.. and may at times need to be reminded of such
4. On a Workstream-by-Workstream basis – defining the change initiative and the target state operating model with supporting processes is key. Aligning to line management is critical.
5. When I lead integration, I don’t aim for perfection, but tell others, “this is my view of reality”. If this is wrong, it’s your responsibility to correct / advise me differently. You need strong leadership to drive to the outcomes.
6. Press, influence, cajole, goad, entice stakeholders to drive out the operating model & integration plan – including the transition to operations “steady state’. The Integration Lead is a critical role,… own it. Quoting William Shakespeare “All the world’s a stage, And all the men and women merely Players;They have their exits and their entrances,…”
7. Map out the workstreams where & when the project transitions to operational – and the attributes of this juncture. What does the operational team need to be equipped and prepared to do?Hi Chris, in my experience this “hand-off” is a very common and tricky factor in post-merger integration. It’s important to recognize that the handoff will have either a positive or negative impact on the integration; that should be a catalyst to ensure your team is addressing this phase of an integration. In my experience, the best handoff from the IMO to the business has been when the business sponsor appoints a leader to own the future operating model. Recruiting this leader should be done at the start of due diligence and that leader partners with the IMO leader to co-lead the integration. One of the roles this leader will take responsibility for is to assemble a larger team around them to directly engage with the target company’s teams. In addition, the times when this handoff has gone well, we have always had an actively engaged deal sponsor to support the integration.
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