Tag Archives: acquisition

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Integrating Teams Post Acquisition for Perfect Harmony – David Falzani

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Managing your people and making sure it works
You’ve been through a successful acquisition or merger. All the legal proceedings and necessary preparation that needed to take place have been done successfully. But this is only the beginning of a long and important process of integration. A lot of post-M&As are mismanaged  and result in poor outcomes.

Too much can often take place too quickly, leading to an erosion of previous internal cultures, a loss of staff, and a dangerous loss of profitability. After the acquisition, it is the task of management to ensure that the new, combined teams are able to build a shared vision of where the firm is going. It’s time to build a new internal culture forged through cooperation and consensus.

Start while you’re ahead
The most important foundations of post-M&A integration are established during pre-deal negotiations. Setting targets for integration should be considered as much of a priority as the process of establishing key benefits and risks from the deal itself and, indeed, should be based on this evidence and analysis. That’s why it’s vital to assess the internal structure, values and culture of the other party before the deal is done, and vice versa; due diligence is key.

One way this can be achieved is through the use of a clean team. This is an independent group of individuals bound by strict confidentiality agreements who gather the necessary data for integration, which usually lies out of the reach of an acquirer’s employees pre-deal.

To enable comprehensive integration planning, many organisations have begun using clean teams to gather information, analyse scenarios, and make preliminary integration decisions prior to deal consummation.

These clean teams operate under strict protocols that enable competitive or confidential information to be aggregated and summarised in a form that helps leadership review the analysis about the future combined organisation without violating competition laws – Aon Hewitt.

Have meetings with the other party involved in the merger or acquisition and work together to collate your findings and establish the sources of risk and possible friction. Establish an integration plan together, structured around core values, will save your company a lot of pain in the long run.

Making the hard decisions manageable
A merger or acquisition can be a stressful time for everyone, but especially employees. A particular source of employees’ anxiety stems from concerns about job security. Employees and line managers alike are unsure if there is going to be a place for them after the deal. Everyone knows there could be difficult decisions ahead, and that some staff may become surplus to requirement as the new business is forged.

If not well managed, the post-acquisition/merger stage can be messy and cause grief for those taking redundancy (voluntary or compulsory) and the managers who have to implement the programme. Losing a job can trigger a lot of personal issues that can damage employees’ well-being, resulting in loss of self-worth, feelings of betrayal, and a loss of identity. It’s important to handle these situations properly – negative effects and perceptions don’t impact on outgoing staff and those staying with the company. Creating negative perceptions of management ethos will make it hard to win ‘hearts and minds’ and to take the business forward.

Managing properly not only means treating people with dignity, but providing concrete support, for example, offering outgoing employees resources and support to help them transition to another job or career. There are many outplacement and career transition services available. It’s good practice to organise such services as part of a redundancy package, or to allocate individuals funds to enable them to choose an outplacement agency themselves.

Building a new shared culture
Having identified and planned your post-acquisition or merger integration, it’s time to implement it. The problem with many integration plans is that management can fall into the trap of coming in and saying to the new team, “this is how things are going to work.” Communicating a vision is important, but workplace cultures tend to develop organically; they can’t be manufactured.

If you’ve already established what sort of culture will benefit the integrated company, it’s time to start incentivising the sort of behaviours you want to emerge, particularly for line managers. This can be achieved by getting the staff engaged in the vision for the company, involving them in decisions, listening to ideas as well as providing attractive reward and recognition schemes. As well as this, you’ll hopefully have identified key time frames for achieving your integration plan fully – 100 days is a popular and effective starting time scale. A cohesive strategy covering planning, communication, action and co-operation is the name of the game.

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Preparing the Business for Sale

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In previous blogs, I’ve discussed how you can prepare to leave a business you’ve built using various exit strategies and preparation methods, such as appointing a corporate finance advisory; stabilising finances over a period of five years; and setting personal objectives for the future. Continuing this theme, then, I want to get down to brass tacks regarding the actual sale preparation by focusing on three key themes: selling the future, balancing negotiations, and knowing your buyer. Hopefully, this help to build up a better picture of what needs to be done by the seller in the ‘legal’ stages of selling a business.

Sell the future, not just the past
You might have heard that when selling your business, it’s important to provide a detailed five year financial history (including audited financial statements) to potential buyers. This isn’t wrong, and a lot of preparation activities take place in light of this; you must stabilise profitability over five years, you should hire a corporate finance advisory with the final sale, etc. It may feel slightly underwhelming, as if you are only building the company for its retrospective value at the point of sale.

However, you aren’t just selling the past.  Buyers see businesses as valuable because of what their pasts signify about their potential futures. It might feel demoralising to be building a stronger company for different future owners, but, actually, you will reap the benefits as well, because a bright future is obviously much more marketable.

That’s why, alongside a detailed financial history, it’s vital to establish a two to three year sales forecast for your company. Gilmore Lewis suggests the most accurate forecasts utilise an array of data from multiple sources, not just data from a financial history. These sources frequently include: the business’ current sales pipeline; its historic run rate; its field forecast; and sales management discretion. The aim is to build up as accurate a forecast as possible based on past data in order to establish a marketable future for the company. That’s why he suggests:

“Accuracy of forecasts can be measured by providing actual results side by side with previous time period forecasts. This can provide a level of visibility into the accuracy of the forecast as well as the individual contributors.” For more information on developing accurate forecasts, read Gilmore Lewis’ excellent article How to Develop an Effective Sales Forecast.

So, to return to preparing the business for sale, it’s good practice to develop regular quarterly or annual forecasts for the business, and this is hopefully something your company has already been doing. This allows you to judge the accuracy of past forecasts by comparing them with the actual financial history of outcomes. Now, fast-forward to the sale itself.  This information will ultimately strengthen your negotiating position, as you are now able to present not just a financial history and a forecast for the future, but also evidence to verify just how accurate your forecasting methodology is. Working with the future in mind in your medium-term sales prep will therefore make your short term preparation much easier – in fact, stronger.

Integrative negotiation
This brings us to the issue of negotiation, as forecasts and financial histories are ultimately what will support your negotiating position with any potential buyers. Negotiating tactics are frequently presented in popular media as almost back-handed or otherwise ‘hard and fast’ ‘moves’ aimed at more or less manipulating the other party into accepting your position.

However, I want to dispel this myth, as negotiating is rarely this simple – plus, sticking to such methods can seriously damage not only your professional relationship with a potential buyer, but your negotiating position itself. For example, saying something is “non-negotiable” is more likely to scare a buyer off than convince them of your terms. The end goal of a negotiation is, ultimately, to maximise outcomes for both parties involved. Although a negotiation may only confront you from one angle, the other party is seeking to benefit from buying the business just as much as you are seeking to benefit from its sale. Therefore, a little empathy with the other’s position (their angles, goals, and value) can go a long way. You want to aim for a deal that will benefit the other party as well as your own – a negotiation should not be seen as adversarial.

This raises two important issues that you should focus on in the early stages of integrative negotiation.

Reservation point
First, you need to have a clear position on what your objectives are within the sale. This will includes personal profit or recompense of some kind, but also things like the speed of transition between owners (eg for the benefit of employees and managers who will stay on afterwards) and various legal or contractual terms.  It is especially your terms – rather than price – which can come to make or break a negotiation.  It is here that you firmly establish a reservation point, or limits of your party’s terms beyond which you will not go.   Between your reservation point and theirs lies the space in which negotiation and bargaining takes place.

You can think of your reservation point as your “walk-away” point – the stage at which you know a buyer will not meet your terms or needs. This isn’t something you want to use as a ‘threat’, but you need to demonstrate that you are prepared to walk away if necessary. From here, you can properly negotiate and deploy tactics such as ‘expanding the pie’ – giving away small losses that the other party will receive as a boon, in order to make your terms more appealing to theirs (read more on the MIT site about these terms here).

Full information
Second, as we’ve already discussed, you need to provide any potential buyer with complete and transparent information about:

  • what it is you seek to gain from the sale, and
  • the specifics of the business’ financial history, statements, and projections

Knowing your buyer
The flipside of this is knowing your buyer. You should establish profiles of their histories and angles (whether the buyers are a group or individual); you want to try and build up as clear a picture of the other party as possible in order to understand their terms and where they will (or won’t) accommodate yours. This puts you on stronger ground when laying down your terms and negotiating the details.

Although the negotiation process can be hard, it should take place within a collaborative environment to include both your own team as well as the potential buying party. It’s worth considering adding an intermediary or business broker to your team, which might already include a corporate finance advisor and a legal team.  Their role is to support you by facilitating the sale; by helping to build your selling package; and by maintaining a well-researched awareness of potential buyers. They can also help with the legal aspect of negotiations, having the ability to draw up confidentiality agreements and being involved in due diligence.

By preparing your business for sale in a way that is transparent, collaborative, and forward-looking, you will already be well on the way to getting the best deal possible out of a future sale. Although an intermediary can help a smooth business sale in myriad ways, it is ultimately down to you as the head of the business to pull the whole thing off.