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February 19, 2024

It's common to see due diligence and integration as separate stages in M&A, but combining them can make the M&A process much smoother and more effective. But how exactly can we weave these two critical phases together effectively? In this article, Amy M. Weck, VP, M&A and integrations at The Liberty Company Insurance Brokers, offers practical strategies in connecting diligence and integration in M&A for optimal outcomes.

“Integrations are not easy; it happens over days, weeks, months, and sometimes years, depending on the industry you’re in and how much you want to integrate. Your company has to define autonomy versus integration to make that vision clearer as you go through more integrations.” – Amy M. Weck

Connecting diligence and integration

The biggest mistake companies make in M&A is having a disconnected diligence and integration team. When this happens, the diligence team will review the target company thoroughly and throw everything over to a team that has no knowledge about the target company and the deal itself. This is highly inefficient and will cause delays when it comes to integration execution. 

The key to connecting diligence and integration is to involve the integration team as soon as the LOI is signed. Get the integration team to take ownership of reviewing the diligence data. Amy believes that there is no one better to review and analyze the diligence data, than the subject matter experts who handle the integrations afterward. They know what they're looking for and what questions to ask. 

Foster a one-team mindset

  1. Communicate the 'Why' Behind Every Deal

Gather everyone in a meeting and communicate the deal rationale. This will ensure every action aligns with the overarching goals of the deal. When everyone understands the 'why,' decision-making becomes more focused, and the path to successful integration becomes clearer.

  1. Break down silos

M&A teams often operate in a very siloed manner, which causes a lot of problems and delays. Everyone must understand how each of their work affects other functions to promote collaboration. Functions must go beyond checklists and start taking responsibility for their own workstream. When teams operate as a unified entity, the integration process becomes more streamlined, reducing conflicts and enhancing efficiency.

  1. Enhance Communication 

To enhance communication, use tools like DealRoom to increase efficiency. Weekly meetings are also essential to ensure that everyone is on the same page. Transparent communication will make it easier to identify and address potential issues early in the process. As per Amy, open channels lead to informed decisions. When information flows freely, teams can make more informed decisions, reducing risks and improving the chances of a successful deal.

  1. Promote Parallel Work Streams 

Start integration planning during the diligence phase. The deal team must collaborate with the integration team and establish the integration strategy and timeline for post-close execution. Also, the integration team can convert diligence findings into actionable items in real time. 

  1. Recalibrating Processes for Optimization

As per Amy, failing integrations is inevitable. But the key is to take a break to realign and improve how the process is managed. Sometimes, the best way to move forward is to take a step back. If there's a need to recalibrate the M&A process, it's crucial to communicate with the team about their needs. This pause allows for the optimization of strategies, ensuring that the M&A activities are aligned with the company's goals and the specific nuances of each deal.

A well-connected due diligence and integration process can lead to more efficient use of resources, reducing the time and cost associated with M&A activities. By having a clear understanding of what needs to be integrated and how, companies can avoid redundant efforts and focus on critical integration areas.

Handling the integration team

The hardest part when dealing with integration experts is that they have full time jobs on top of the deal. With inefficient processes, they can become overwhelmed, resulting in bottlenecks and siloes.

One of the most effective ways to manage them is to conduct weekly meetings. Feeding them consistent communication, rather than drowning them with information in one meeting. Also, instead of telling them what to do, listen and understand what they need to be effective in their role. Properly communicate the expectations and deadlines so they know what is expected of them.

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