The Ultimate Guide to Post Deal
Integration

1. Maintaining Continuity

Even the smoothest of ownership changes has the potential to be disruptive. Employees of a target company may fear potential changes, operations could be affected and the financial structure of the business will likely not look the same as it did before acquisition.

The aim, of course, is to ensure business continuity - maintaining seamless operations and minimising disruptions. Unless there is good reason for it, protecting the status quo is often a better strategy than making sweeping changes in the business during the early days. Anything that functions already should be preserved, and anything that doesn't should be dealt with methodically rather than erratically.

This requires clear and proactive communication to employees, customers, suppliers and stakeholders alike, to reduce uncertainty and gain confidence.

2. Assembling The A-Team

When acquiring a company, it's important to have a clear idea of who will do what. All acquisitions will have a good deal of legal and financial due-diligence - but operational, and particularly cultural, due diligence are often overlooked.

We recommend plenty of each in the pre-acquisition phase. You should have a good idea of who will do what after the deal goes through. Will you send members of your team to be boots on the ground after the acquisition, or perhaps fill this role yourself? Similarly, if the previous owners had an active role in the company, who from the middle tier management team could be promoted to fill their shoes?

Having a thorough understanding of who will fill key roles after the acquisition is critical for success and will make the post-deal integration phase much smoother. These key players will be the drivers of cultural alignment between yourself (the buyer) and the target company. People are the most important part of any business, so having the right ones in place is usually 90% of the difference between failure and success.

Two of the really useful questions we recommend asking yourself when thinking about the people in your newly acquired business are as follows:

• How will you ensure that you retain key talent? The importance of having good relationships with people who move the needle in the target company cannot be understated.
• Do you have a contingency plan for if things go wrong? Key people can leave any company (not just newly acquired ones) so it is important that information and processes exist somewhere outside of the brains of those people.

3. Cultural Alignment

Culture is the beating heart of the business. It's the stuff that you don't see on the balance sheet or the dashboards - but it's always there. We think that it's one of the most complex and often underestimated aspects of post-deal integration.

Your first goal as an acquirer is not to change but to observe; you can't expect to change the culture of a business overnight.

Take note of the leadership and management style of your target company - how decisions are made and autonomy is granted. What are the workplace norms and expectations? Is communication formal or informal? What are the attitudes to remote working or work-life balance? Do the values or missions written on the wall accurately reflect what you see in the boardroom - or on the factory floor, for that matter? How are people compensated, incentivised and developed?

Only once you have a handle on these things should you begin the delicate process of tweaking them. As with all aspects of integration, it's important that change is clearly communicated, concerns are addressed fairly and expectations are set and managed well in order to stand the best part of success.

4. Defining Metrics

As a business owner, it is your job to know what is happening in the business at all times - or, at least, to have someone you trust who is all over that.

We really push the importance of metrics and dashboards for this. You should establish the key levers for the business and figure out which numbers are important to track in order to have eagle-eyed oversight of these.

We often think of financial metrics first and foremost - things like revenue, profit margins and cash flow. Sales and marketing metrics are next - perhaps conversion rate, customer retention or marketing ROI. Operational metrics, such as employee productivity, operational efficiency and employee turnover rate are of course important. On top of that, there are plenty of industry specific metrics that are important.

From revenue to sick days, the adage is true: what gets measured gets managed, and what gets managed gets better. Having excellent dashboards in place will mean you can immediately see when things change - and deal with them as soon as needed.

5. Financial, Legal & Compliance

It goes without saying that good due diligence aims to nip any nasty surprises in the bud before you acquire a company. With that said, once the deal is through, all financial, legal and compliance obligations are your responsibility - the buck stops with you!

That means you need to quickly go from understanding those obligations to enforcing them.

On the financial side, you will need to ensure that accounting methods, reporting structures and financial statements are aligned, to create a unified financial framework. You may need to ensure that your target company follows the same accounting principles as its new parent co, implement or change internal controls & audit procedures, and integrate any financial systems with your own.

If your acquisition was a leveraged buyout, it is your responsibility to be all over the cash flow - as the target co must now service its debt in addition to all previous financial commitments. You should ensure that you have forecasted and budgeted appropriately for the coming years, and have a sound action plan for worst-case scenarios, economic downturns and other unforeseen events where possible.

From a regulatory perspective, it is of course your duty to notify relevant regulatory authorities of the acquisition and ensure timely submission of required filings. You should also immerse yourself in any industry-specific compliance requirements, such as healthcare, finance, or environmental regulations. If you own the acquired company but will not be part of the “boots on the ground” team that are running it, you must ensure that someone you trust is all over these regulations and any relevant legislation!

6. The Hundred Day Post-Deal Integration Plan

The first stage of your integration is critical. A hundred days isn't just a nice, round number - its an adequate amount of time to get behind the eight ball and lay a solid foundation for the coming months and years, during which you'll steer your acquisition.

Days 1 - 30 (Preparation and Communication)

We already stated the importance of not rocking the boat during the integration phase of your acquisition. Rarely are the first hundred days about big sweeping changes - let alone the first thirty.

During your first month at the helm, your focus is most likely on two things: preparation and communication. You need to establish a post-acquisition leadership structure and define decision making authority. The key players will most likely be a combination of the target company's leadership team, yourself or your team, and possibly some non-execs or advisors.

Depending on your acquisition, you may have to announce the merger both internally and externally. It's important that this is done with clear, unified and unambiguous messaging. You can use communication tools such as town halls, leadership Q&As and 1-on-1s to ensure your messaging is landing.

Operational readiness is critical, and you should have a firm understanding of the levers to pull from your operational due diligence. You should identify any critical business functions that require immediate attention or alignment, and do everything in your power to ensure business continuity, maintaining good client, customer and supplier relationships.

Finally - cultural alignment is extremely important. A cultural assessment during the first thirty days should give you a deeper understanding of values, leadership styles and employee expectations. Any problems in the business' culture have the potential to be just as explosive as operational setbacks or other major problems. By day 30 you want to have a firm understanding of the work environment - both the parts that are good and those that need improvement.

By Day 30:

• You have a firm and established leadership / management team
• You have communicated the merger clearly to all internal and external stakeholders
• You have identified any potential operational issues
• You have an excellent understanding of company culture

Days 31 - 70 (Execution & Process)

After a successful first month, it is time to begin executing. Broadly speaking, month one is about people; we suggest that much of month two is about process.

That starts with financial and legal integration. Financial reporting structures and accounting policies should be aligned, banking relationships and treasury functions should be reviewed. Where possible, you and your team should ensure compliance with all regulatory requirements, across all jurisdictions.

For companies of any size - but particularly those with significant headcount - this is also the right time to familiarise yourself with the businesses human resources function. It might be that the employee compensation and benefits strategy needs to be reviewed, or that performance management has been left wanting - with no clear framework for employee engagement, reviews or communication.

At this point, we have still not reviewed the technology and systems of your acquired company (and it is worth mentioning that all companies are different, so the order in which you approach these things may well be different as well!). This is a good time to assess IT systems, and where necessary, determine how to begin integrating them with your own. You may also need to review cybersecurity and data governance for good practice.

The same goes for marketing. You will need to understand what makes the till ring; figure out the important metrics that drive your sales, and ultimately, revenue. This marks the beginning of our shift in focus towards optimisation and growth!

Days 31 - 70 are the time when you:

• Begin financial and legal integration
• Familiarise yourself with HR functions
• Assess IT systems and how to integrate them
• Understand your marketing metrics

Ultimately during this phase, you must gain a thorough understanding of the processes in the business - the “how things work” - in order to begin integrating, updating and improving them.

Days 71 - 100 (Optimisation and Growth)

As a buy-side M&A brokerage, Acquisition Advisory generally focus on “buy-and-build” - we service entrepreneurs, investors and PE firms who are looking to acquire in order to grow companies.

70 days into a 100 day plan, it is time to turn your mind to optimisation and growth. We have a firm knowledge of the people and the processes in the company and can take action to increase efficiency and scale. For most of our clients, it's time to do what they do best.

We already discussed the importance of defining metrics in this article - what gets measured gets managed, and what gets managed gets better. Once you know which levers there are, you can begin pulling them to improve the performance of the company.

So, if you don't have them in place already, now is the time to firm up your KPIs, ensuring that nothing has dipped in the integration period and beginning to think about how you can drive those numbers in the right direction.

Similarly, after the excitement of the acquisition has settled down and the people in the business feel confident in your leadership, you can begin improving efficiencies and possibly cutting costs. Perhaps it is a case of reassigning people in certain teams, hiring or firing, re-negotiating contracts, adjusting processes or tweaking incentives.

If your acquisition is part of a portfolio, this final 30 days of the plan is where you can begin to start exploring any synergies as well, in order to save costs and increase efficiency across the board. It's time to start putting these plans into action.

Finally, with a smooth transition under your belt, you can start thinking about long term planning. By now you can start to define the roadmap for continued growth and operational excellence, identifying areas for future investment, innovation and expansion.

By Day 100:

• You have great oversight of metrics and KPIs
• You can begin driving growth and increasing efficiencies
• Any synergies within your portfolio can be explored
• It is time to think about how you will grow your company in the long term!

7. Best of Luck!

As a buyer of companies (or a facilitator of this process), you are in the privileged position of having a job that is exciting, rewarding and probably impactful to the lives of many people. It's a great responsibility, and probably a rollercoaster ride - so enjoy it.

We've now set out some of the most important considerations for your post-deal integration, and discussed where they fall within a hundred day plan.

With over a hundred deals under our belt, we'd like to finish with a few key points picked out from this article that we think will stand you in good stead and help you turn our advice into action.

• We mentioned this before, but no two companies are the same - so no two integrations will be the same either! Use your expertise to understand the needs of your acquired company and adjust accordingly. The playbook isn't set in stone, so you have to be agile and think on your feet.
• Metrics are so important! It's likely that you need an overview that is factual and easy to understand at a glance. Use dashboards to your advantage, and ensure that key metrics are not just accessible but visible. Don't allow information to be hidden or lost to the ether, or you'll be vulnerable to nasty surprises.
• People are unpredictable and culture shouldn't be underestimated. Company culture doesn't happen by accident - it needs leaders who enforce it. You can never fully control the actions of the people in your business, but you can proactively create an environment which reduces the risk of the potential problems they could cause. For employees, a company can be a lifeline or a nightmare. Be in touch with your people; treat them well and they will make it worth your while.

Thanks for reading! Acquisition Advisory is a boutique buy-side brokerage. We can also help you with every part of your post-deal integration - from cultural assessments to financial planning, and everything in between! Contact us now with no obligations.