Blog by Ben Greenberg, VP of Corporate Development at IT Solutions
If you’re considering M&A initiatives or navigating through the challenges of growing your business, we invite you to connect with Ben (Benjamin.Greenberg@itsolutions-inc.com).
The immediate months following an acquisition are crucial. There are significant decisions that will have to be made — and quickly — for an efficient integration. This article outlines key steps to help you make better decisions during that first critical 100 days.
Your integration requires careful planning and agility and begins well before the deal closes. The better you understand the operational DNA of the company, the easier your transition will be. However, no matter how much work you put in during your M&A due diligence, there are always things you will uncover after the papers are signed. According to McKinsey & Company, “almost 50 percent of the time, due diligence conducted before a merger fails to provide an adequate roadmap to capturing synergies and creating value.” You will need to take these into account as you work through your checklist and build them into your integration roadmap.
Before you begin the work, however, you need to recognize the five fundamental truths that will impact the work you do.
Consider these truths as guiding principles as you work through the integration to minimize impact and accelerate progress.
Managing people during the transition is job one. You want to keep strong performers and develop opportunities for top talent to flourish. If you are making personnel changes, do it as quickly as possible to solidify organizational structure. While some people may have to leave the company or adjust to new roles, nobody wants the sword hanging over their head wondering when — or if — it’s going to swing in their direction.
Ensuring all employees keep their initial hire date and tenure is a great way to build goodwill right off the bat.
Transparent communication, one of your five fundamental truths, is central to managing through employee concerns. Connecting changes to organizational goals is crucial to empowering employees. During the first 100 days, leaders need to be present, visible, and accessible both onsite and digitally. Availability and openness provide a forum for discussion to ease fears.
Employees and clients didn’t ask for this to happen. Employees want a great place to work and make an impact; clients want reliable service. But change is being imposed on them. It’s your job to manage through this and help everyone see the changes as a positive force. It won’t be seen that way by some — It’s important to empathize with the fact that maybe for example some employees had a bad experience with working for a larger company or going through a previous integration.
In some cases, you can’t protect everyone’s position and status. This can impact performance and demoralize some team members. You need to be aware of the cultural dynamics and proactively address changes. According to Harvard Business Review, studies show that between 70% and 90% of mergers fall short of expectations during the post-acquisition phase.
Ignore change management at your own peril.
You also need to manage your clients. They may or may not see change as a positive force. Perhaps the Adviser or manager they’ve dealt with in the past is leaving or your operating system will be different. Prioritizing — and communicating — change management practices across internal and external stakeholders is crucial for successful integration.
Managing cultural change has its own stages. For example, to bring together organizations into a blended culture, McKinsey & Company recommends corporate leaders guide teams through these stages:
It is imperative to incorporate strategic priorities for the combined organization, including the culture to support these priorities. Setting the direction includes articulating the vision — consistently and regularly — while effectively communicating the operating model and performance expectations.
Mergers and acquisitions inject anxiety into organizations. Company leaders must express optimism and ease those concerns. That’s one reason why personnel changes need to happen quickly to alleviate concerns about additional job losses.
Beyond that, however, leadership must now transition organizations from relief to excitement about the new structure and future opportunities. Growth can be accelerated by developing compelling change stories and demonstrating progress.
Employees begin to settle into the new structure. The infrastructure is in shape. Processes are defined. Now, it’s time to build the essential capabilities and codify them with policies and governance.
As legacy systems start to phase out, changes start to become standard operating procedures.
In the final phase, it’s to go past integration and adoption to acceleration. As the entire organization is now unified, driving execution — aligned with strategic goals — is the pathway to innovating and growing the company.
These two items — personnel and change management — must be part of every item on your integration checklist to build a foundation for success.
The first 100 days must focus on the key activities to follow the crucial paths to ensure business continuity. It is crucial to define operating models and develop the core components and organizational levers. Detailed integration and execution plans and formalize your integration roadmap while implementing monitoring tools and KPIs focused on the integration itself.
Let’s break down some of the key steps in each of the early months.
The early stages of integration require immersive learning across both legacy environments while establishing strong lines of communication. Look for quick wins where you can make changes, but resist the temptation to come in with a bulldozer until assessments are complete. You don’t want to have to undo decisions you’ve already made.
Some key steps at this phase include these best practices:
During this initial period, you must confirm the accuracy of pre-acquisition due diligence and gain an understanding of information and infrastructure requirements. For example, understanding how the current infrastructure of the two business entities work, where they are aligned with business goals, and where adjustments need to be made.
It’s common to want to go in and boil the ocean and make changes. However, the smart play is to go back to your original thesis. Focus early efforts on those items that have the most impact and minimal disruption.
At the onset of integration planning, taking inventory of the collective environment (warts and all) establishes the blueprint. Resist early assumptions; thorough current state assessments uncover priorities that may be hidden in the complex infrastructure.
Defining actionable synergies requires confronting hard truths. Success means supporting business goals, not just preserving the status quo. Deliberate planning gives way to agile progress when mutual understanding guides technology integration decisions and they may be different from a traditional approach.
A traditional approach would have the acquired company adopt the systems and processes of the acquiring company. Yet, there may be efficiencies and synergies lurking among both companies. It is crucial to evaluate the infrastructure and tools to find the optimal solution. The underlying value of each system needs assessment. If it doesn’t add value, it needs to be eliminated.
It is also important to understand the current in-flight projects or initiatives and current problems or issues that produce bottlenecks. When new systems or processes can eliminate these bottlenecks, employees are more likely to embrace a new way of doing things.
Most MSPs or SMBs in general will not likely have dedicated teams they can commit to the full scope of the integration. You need to consider who needs to be involved and the resource allocation. You need to have at least one person that is 100% accountable as the integration lead and the authority to make decisions and allocate resources. It’s way too easy to spread the work around and end up pointing fingers.
Don’t shy away from getting external help. Experienced integration support can streamline the process. While there may be a cost upfront, it’s much better to spend a bit now rather than have to spend increasingly more later to deal with failures or oversights that negatively impact your business.
With core knowledge transfer activities after the first 60 days, execution ramps up while planning for larger system migrations gets underway. Maintaining open dialogue and transparency sets the stage for the busier months ahead.
As enterprise-wide adoption of shared systems increases, the second quarter is a crucial window for integrating and centralizing the underlying infrastructure, processes, and policies. While users acclimate to new working environments, transformation teams have an urgent need to establish standardized ways of operating.
Months two through four of integration focus intensely on centralizing key infrastructure, systems, and collaboration capabilities to firmly establish one, unified company.
Best practices for aligning your organization include:
While collaborating and accessing systems unify, transforming core platforms like finance, HR, and procurement is pivotal. Though optimized architectures may take shape over years, establishing future-state foundations is crucial to building systems with longevity.
Whether one of the company’s systems is adopted, or a new system is put in place, data migration and consolidation will occur with a high focus on data integrity.
The first 100 days are the most critical to creating long-term momentum. If initial goals aren’t met, the integration project risks stagnation. There is a narrow window of opportunity to set the pace of change and establish the building blocks for the future.
Throughout every stage of integration, business leaders must stay focused on core objectives with active measurement in place. As time passes, it becomes harder to change culture, so the first 100 days set the tone. This period can lead to a bright post-merger future, or it can fail to deliver on its goals. Only by measuring the results of your change initiatives can you demonstrate success and build confidence in team members, investors, and clients.
Embarking on a journey of M&A growth is both thrilling and demanding. If you’re considering M&A initiatives or navigating through the challenges of growing your business, we invite you to connect with Ben Greenberg, VP of Corporate Development at IT Solutions.
Email: Benjamin.Greenberg@itsolutions-inc.com
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