By: Caitlin Gibson
At its core, the post-merger integration process is the ultimate group project. To ensure its success, everyone has to do their part. There has to be a realistic plan in place, guided by a set of specific, achievable goals. If any part of the process is overlooked or breaks down, a merger and acquisition can fail, resulting in a colossal loss of money, resources, and trust.
To mitigate that risk and ensure your M&A succeeds and your post-merger integration process goes smoothly, leverage the following approach, steps, and best practices.
Why is a Post-Merger Integration Checklist So Valuable?
To clarify, a merger and acquisition, or M&A, is the consolidation of companies or assets through various financial deals. A merger itself is the corporate strategy of combining two separate entities into a single company, and the acquisition is the actual purchase of all or a portion of a corporate asset or target company. An M&A is the point at which anticipated synergies—or the proposed, tangible increase to the acquiring company’s earnings—will manifest…or not. About half of M&As fail to create shareholder value. Why? Because half of acquiring companies either aren’t prepared for or completely underestimate the importance of the post-merger integration, or PMI, process.
That is, the process of bringing two or more companies together in an effort to realize a deal’s predicted value.
Issues That Arise During a PMI
The post-merger integration process is essential. It solves for numerous potential issues that come with such a business transformation, including:
Communication breakdowns or absences
It’s hard enough for companies that are pre-M&A to master their internal and external communications. After an M&A, many combined companies see two sets of communications being sent to employees, customers, and stakeholders, if communications are prioritized at all. A post-merger integration process accounts for the communication imperative to ensure every internal and external message is consistent and complementary to the rest.
Human capital issues
Desired financial gain may propel an M&A, but human beings are at its core, and an effective post-merger integration process prioritizes the needs of the people impacted by the deal. This includes mitigating potential relocation and severance package issues or delays, proactively dodging benefit or salary alignment snags, and preventing possible training gaps in the newly combined workforce, all managed by human resources.
From moving equipment to consolidating customer-facing functions, plenty of operational challenges await an integrated company. Planning for these unavoidable challenges ensures everyone has the support they need to do their job well.
Sales and marketing misalignments
Every aspect of the sales and marketing integration is aided by the post-merger integration process, including the syncing of customers and communications, pricing, websites, and branding. It’s about protecting the products, services, and resources that inspired the M&A in the first place.
Financial reporting integration is a given; banking, sales, and purchasing accounts have to be consolidated. When it comes to the finances, every precaution and proactive step has to be taken as part of the PMI.
Nothing can undercut productivity and efficiency like an IT breakdown. A strong PMI also ensures things like websites, internal platforms, invoicing, and related tools are successfully integrated, too.
Putting the Right People at the Helm
So, who exactly is responsible for executing such a well-planned, extensive post-merger integration process? It’s a cross-functional team comprised of the following people:
Top executives and stakeholders
An M&A’s success starts at the top, so all top executives and key stakeholders have to be included in this process.
Due diligence team members
Your integration and diligence teams should overlap to ensure no aspect of the potential issues outlined above are overlooked.
Again, taking care of the people affected by this process is an imperative. Having human resources representatives manage all people-related issues and areas ensures you look out for your most valuable asset throughout the integration, your people.
A change management expert
This role sees to it that valuable information is gathered from the target company, that the target company’s employees feel seen and cared for, and that leadership is aware of any issues that arise along the way, especially within the first six months. Tools like a talent management software are incredibly complementary to this role.
Before you begin developing your post-integration plan, ask everyone on this cross-functional team to list and prioritize the issues that impact both the target and acquiring company, recommend possible solutions, and put timelines in place for resolving any issues. That way, it’s clear from the start that everyone’s voice and perspective will matter to and ultimately drive the post-merger integration process.
Additionally, create a secure virtual space, like an intranet, if possible, in which you’ll store your post-integration plans and relevant PMI documents. Make sure everyone on the PMI team has access and knows about this information hub. Lastly, be sure to set and host regular meetings throughout the process, so everyone stays in the loop, remains connected, and gets to know each other better along the way.
Crafting Your Post-Merger Integration Checklist
With your team assembled, you’re ready to get to work on your post-merger integration checklist. This is the document that captures all of the steps you need to take to ensure both companies combine in the best way possible. It should be prioritized throughout the M&A and accessible to everyone involved in the process.
The post-merger integration checklist goes beyond the traditional post-merger integration 100-day plan by accounting for every department’s needs and all affected personnel. In particular, the checklist should include plans for:
Short and long-term hiring needs
It’s imperative that those joining the acquiring company’s team are ready and able to perform their jobs without friction. As a result, your checklist should address immediate hiring needs and outline a strategy for long-term hiring, too.
That means creating checklist items for new hire preparation, like the creation and/or compilation of onboarding documentation, benefits information, new hire materials, and plans for and outreach to union workers, if applicable.
Overlap and redundancies
The painful reality of M&As is that they often result in people losing their jobs. Make sure this part of the checklist includes tasks like the creation of layoff and severance forms.
Turnover and employee retention
In times of change and uncertainty, employees often look elsewhere for stability. Be sure to create a space on your checklist to identify and secure top employees and reach out to any disengaged employees, so you can avoid costly turnover and retain your most valuable staff.
Technology and IT
Plan to develop a new organization chart, and merge existing technology and systems. Know what each company is bringing to the table, so you can make the best use of the resources available to you.
Employee development and performance tracking
Put training plans in place, and select the performance management system and tools you want to use. Be sure to determine which systems and platforms, like Workday, for example, you’ll use to streamline development and performance tracking.
Data and knowledge transfer
Due diligence team members will do a lot of this work, but you’ll still want to ensure every department sets up their own data and knowledge transfer process to ensure no important information is lost or overlooked during the integration.
Business procedures and internal policies
When two sets of procedures or policies exist, there’ll inevitably be friction among entire departments and/or individual employees. Plan to consolidate these in a way that’ll serve everyone well.
This is one of the most vulnerable areas of any post-merger integration. A company’s culture is the glue that holds its people together. If two different company cultures are left uncombined, your employees won’t be unified behind the merged company’s mission and goals. For example, if one company has flexible working hours and a generous work from home policy while the other observes a strict 8 am-5 pm office-based workday, there are bound to be clashes and confusion. Set about blending the two cultures by establishing a strong core values communication plan.
Products and services
Decide how you’ll continue, combine, or eliminate any offered products or services, as well as the branding associated with them.
In each of the above areas, take time to consider and document problems that could arise.
For example, if both companies were using a different Customer Relationship Management, or CRM, system, you’ll need to decide which one will be used post-merger.
Steps for a Successful Post-Merger Integration
The above checklist may seem daunting, but don’t worry. By breaking it into smaller pieces, you’ll be able to more readily delegate action items, stay organized, and manage all that needs to be done.
Additionally, follow these steps to ensure the completion of your checklist and PMI overall goes smoothly:
Start planning early.
M&A integration planning needs to start at the beginning of the deal, and the team’s goals should be re-evaluated throughout the integration.
Hold a pre-close meeting.
This should happen at the start of the deal. Use this meeting to assemble your integration team, including all key stakeholders, and establish your PMI framework. Determine how everyone will work together, set up needed future meetings, delegate responsibilities, and start sharing information with each other.
Identify due diligence team members.
Successful M&A integrations ensure due diligence team members are accounted for well before the deal is signed. That’s because these folks need to deal with any legal, tax, or employee relations issues before or right at the start of the integration. Tools like DealRoom’s M&A software can make this work much more efficient.
Pre-close the deal.
This is when you’ll review the deal’s synergies, set up any additional needed teams, and confirm team leaders.
Hold a post-merger kickoff meeting.
Use this meeting to confirm the items on your PMI checklist, and identify any roadblocks you might face in the first six months of the integration. This is the time to get out in front of those challenges, and proactively assign people to handle them.
Establish your communication channels.
Without strong communication, important tasks can fall through the cracks and key stakeholders kept out of the loop. Consider holding quick weekly or monthly meetings at which integration team members will share updates on their areas of the checklist, so progress can be reported up to leadership.
Review the PMI’s progress at regular intervals.
Formally check in on the integration’s progress every few weeks. This allows you to re-align teams if they get off track or revise goals in light of new information, rather than let issues snowball.
Post-Merger Integration Best Practices
Throughout the process, leverage the following best practices to keep things moving smoothly:
Be open to a new organizational design.
Rather than impose an existing structure because it’s familiar, brainstorm alternatives. It may be that the best structure is one neither company currently has. By picking the best organizational design at the outset, you can also prevent potentially costly re-organizations down the road while the integration process is still taking place.
Include key stakeholders from both companies.
Decision-making should be a collaborative effort between teams from the target and acquiring company. By setting the expectation that everyone’s participation and input matters, you set yourself up for a much more equitable, open integration process.
Find out how people perceive their pay.
By learning about the existing compensation arrangements within the target company, you’ll be better prepared to communicate any new arrangements, philosophies, or expectations around pay.
Standardize pay scales, work rules, and branding.
Everyone should be clear on the new set of expectations in each of these areas, like what the salary range is now for a given role and which logo to use in their email signature.
Take advantage of M&A software and tools.
These can speed up the integration process and create valuable data for everyone on the team to use as they complete their checklist items. Excel may have been the best system at one time, but there’s more efficient technology available now that will keep everything organized and transparent.
Hold one-on-one interviews with the target company’s employees.
Gather their initial perceptions of the M&A. Find out what people are concerned about and what support they’ll need to do their jobs with minimal, if any, friction. You’ll be able to assess employee morale across the merged company, and be able to communicate employee sentiment to leadership in a meaningful way.
Conduct a climate survey using a PMI questionnaire.
Six months after the deal closes and you conduct those initial employee interviews, use a survey to get a temperature check. This allows leadership to see what’s going well and where more work needs to be done.
Be wary of those M&A “playbooks.”
Playbooks and 100-day plans assume that any two deals are alike, and they just aren’t. It’s not possible to have a template for every aspect of a deal and integration because every deal involves unique people, perceptions, products, and risks. Instead, view the playbook approach as a general set of guidelines, and stay focused on your customized PMI checklist.
To ensure your M&A is one of the 50% that succeed, assemble a cross-functional team and utilize a customized integration checklist. Adapt any checklist template to suit the unique needs of your organization because they are not one-size-fits-all. Your PMI will have its own style, pace, and rhythm.
Work closely with teams from both the target and acquiring company to understand everyone’s needs, concerns, and hopes for the future. An M&A will always come with challenges, but effective planning and open communication can keep things running smoothly. Stay focused on the true value of the deal, and lean on each other until that value is realized.