All integration should be people-focused. We all know that in the M&A world, culture will outperform strategy. And if you have culture and strategy together, it's unbeatable. And at the end of the day the people will be the one driving or executing the strategy. So you really have to look at
- What does the acquisition mean for the people?
- Who are the people that are going to make this transaction successful?
- What can I do to make sure that I get them on board with the rationale to get the deal objectives?
Ideal Integration Process
My ideal integration process will begin very early. I want to ensure that the sourcing lead, the integration lead and the general manager form a pretty tight relationship. Then, have the integration lead involved in conversations as early as when the management conducts presentations.
By doing so, the integration lead can plan a strong integration plan, understand it, and have a better alignment with the deal leads and the GM (general manager) on what we trying to achieve. It also avoids the repetition of asking the same questions two or three months down the process during diligence.
It also helps the integration build strong relationships with the target company's key employees and management. These relationships come in handy during the post-close when you try to get people on board and execute the transaction.
Many companies don't do this because the integration team is not usually staffed as it should be. Some companies don't have an integration team. Getting them early will be very critical when the bandwidth allows. For me, those team members who are critical during post-close must be involved in the diligence, if possible.
Also with the integration lead stays with the transaction much longer. So if you don't have the right staffing it will be very difficult for integration to manage day-one readiness and post-close.
Involving them during diligence will so also promote a tight relationship with the deal leads that will enable them to design tight processes with documentation to allow integration to catch up as much as they can if they miss time.
Strong Partnerships With Deal Leads
When we look at a target company, we send integration leads to that transaction. So they can start working with the deal leads early on. It allows team members to build relationships, know their work styles, and understand how to follow up to ensure a successful transaction.
We are all under one team. We have a deal side and the integration side and a nice ratio of people. We have 1.5 deal leads to integration that allows bandwidth for integration team members to support one or two deals, while the deal leads are very busy sourcing transactions.
We also meet weekly to review the pipeline. This is very useful because you have to know the different deal stages as an integration lead. When those early conversations or evaluations happen, you can earmark one or two leads, depending on the business units.
The integration needs to learn about the business unit and its process continuously. When you get into the term sheet, they become pretty much a pair. Within our transaction process, the deal lead will lead the diligence processes. By the time we get to signing, we switch our weekly call ownership to the integration.
We use a similar template, but we are moving to that integration planning phase. For any additional questions or information needed from the target, the integration will be one who becomes the point of contact.
Consequences of Late Integration
Sometimes, you have critical information that's not readily available if conversations are not well documented. Because early on, there will be many calls within different functions, and if all of those are not well documented, you'll waste a lot of time trying to catch up and make many mistakes or assumptions that need to be rectified.
You need to document as much as you can or have that integration person become the anchor of your process. You want them to have much knowledge as possible of the transaction.
So that when we pull in new players who don't have much information about the transaction, the integration lead, who has been in the process early, becomes a person who can guide them on where to get the required information or how to quickly catch up so that they can do the job efficiently.
For me, I don't see any downsides to having integration early in the process. On the contrary, it can only help because the more information you have the better you are prepared to address any issues.
Building the Integration Team
When I'm building an integration team, what I look for is diversity in experience. I want them to complement each other. I am looking for people with deep knowledge about different functions because we partner closely with different functions.
Since different transactions bring in different risks and challenges, it helps to know that we have someone who has seen something similar that can help us build a stronger plan and address issues properly.
Early on, I'm looking for experience in M&A and a strong project management experience. Those are very important for me because there's a lot of project management in integration.
After I have those two roles, I'll now look for functional expertise so that if we need to work on a transaction, I have someone who can help. They can also provide more guidance on the work plan because they have expertise on it.
The function people also need to have excellent social skills which will benefit the integration team. The integration team has to oversee a lot without having those people directly onboarded to us. We need to build those relationships because people are the most important in an M&A transaction.
Involving the Integration Team
As early as possible, ideally during the management conversation. If it's impossible, at least during the term sheet so the integration team knows the deal is happening. We need to be able to free up the resources for the integration need to start taking part in the confirmatory due diligence.
And when we get to signing we reverse the role, and the integration lead will now lead the weekly functional conversations to plan for day one and post-close management.
During confirmatory due diligence, they will attend all the calls with the involved functions, and they start planning.
They guide the functions and start creating the work plan. Since they are part of this conversation, they'll start reviewing documents in the data room to catch up on anything they might have missed. Once terms are signed, they'll start planning for day-one readiness.
As an integration lead, you must plan for that day one as soon as possible because you have too many opportunities to mess that up. If you have time to prepare, you should use that advantage well.
Integration Led Diligence
In those situations when I was leading the diligence, I found it very rewarding because the planning was much easier. I was forcing the integration to know everything about the transaction and understand everything in the data room.
When you come in much later, you can be so focused on getting ready for day one that you don't have time to catch up on the other functions. In the end, you have to play a catch-up game when you don't have the time. But it's all about the bandwidth.
If the bandwidth is not there and the deal requires bandwidth to lead the diligence, that works fine, but make sure you have a clever hand-off. Make sure nothing is lost. They need to make sure that they talk to each other in transition. They need to do as much knowledge transfer as possible if one of them has to leave the project
Building an Agile Team
Everyone involved in preparation and integration must be agile because it moves quickly. All transactions are different, so it takes a different type of person to enjoy that because you have a lot of information to process on top of all the people-related issues. So you have to think quickly, create the best plan, and be accountable for the deliverables.
When you're building a team, experience comes in handy. I want to make sure I have a diverse team. For example, some IT-focused people can be a great partner to the IT work stream.
During the diligence or the planning, they can double down on these processes. They are involved in planning, diversity, listening, and then asking questions. So you build the best team that you can, you have to be pretty quick at adjusting if you need to and learn from that for the next transaction.
Focusing on the People
You can focus on the people by doing a lot of listening. It's amazing how much is said in those early conversations. When you pay attention and communicate, you will understand
- The people who are coming over
- What's important to them
- What they're looking for
- What incentives are meaningful to them
You can mitigate many risks by understanding these things. Make sure you have the HR lead involved in conversations as early as possible. They have some expertise, and they can read between the lines a little better than a lot of us. After doing integrations for a long time, a very strong HR partner can quickly read the room and point out who's going to be a challenge coming over.
I also make sure the target company brings their HR partner early. That will help us identify risks early on. It is also important to give the managers on both sides the chance to have conversations. These conversations will let them look at how the teams can work together and assess their culture.
Aside from the company's culture, there are also functional cultures that those managers can tell you about. And it also helps managers make their list of key employees and plan out how you can make them happy.
You have to have many interviews to help you understand the culture. You can also read the employee manual. Although sometimes, the employee manual may not provide the same insight because some may talk about gifts or special holidays, which are a part of the big picture.
If you can conduct diligence onsite, it becomes priceless because you can get a vibe of the place and understand what's important to them.
For example, we had to dive more into how things are done in one company because they were a little more relaxed and there might be a cultural clash coming from a company where there's a certain level of strictness.
If you can be onsite, then it's great. If you cannot, then have as many conversations as possible. You need to have the people team involved in conversations with the employee experience team or internal communication teams to understand
- How the people aspect of the company makes decisions?
- How do they communicate?
- What type of communication do they use?
All of this will come into play during the post-close if both cultures are different.
Culture shaping integration
Let's say you're purchasing a company where organizational decisions are made by a manager who doesn't empower his team. But, then, you're coming from a company where you empower your team members. In your company, your employees see something that needs to be done, they do it because they understand the mission of the company.
Just by seeing this, you know something needs to be done. You have to understand their methods of communication or who communicates if it's top to down or if it's a little more flexible. So, you need to delay the integration process because teams are trying to learn how they will communicate.
Red Flags in Culture Fit
Usually, it's the top leadership when values don't align. Sometimes, it could be through a data check where you don't trust the data you're getting. Maybe you are not happy with how things are presented and you're getting different vibes.
Those are signs that you have to read. The sooner you catch those, the better. And you definitely don't want them post-close. If you catch them post-close, you must make your decisions quickly and fix the ones that can be fixed to move on with the deal.
One of the best practices when onboarding people is to never treat acquired people like new hires. On the other hand, you have to provide as much care as possible because, for some transactions, the team doesn't know about the deal until a couple of days, weeks or even a couple of months before it's closed.
Treating them like new hire puts them at a disadvantage because they don't have the luxury to research or interview the company. They also cannot mentally prepare to join a new company, change processes, and everything.
When coming through transactions with a bunch of your colleagues, you are used to setting up processes and tools. When onboarding doesn't consider that, there's a lot of frustration.
To avoid that, we work closely with our experienced team and customize as much as we can during onboarding by adding training sessions. Some training is done not for the new hire but for the sake of the transaction. During some office hours, you need to allow those team members to go in a smaller setting and ask additional questions.
If it's a two or three-person acquisition, it's easier to pull through. You can do the usual onboarding process. But, if it's a hundred people coming, it takes time to work with experienced people.
Also, if they have an onboarding team, take the chance to look at it so they can allow you to customize the phrasing that will resonate with them. This helps even how you sequence some onboarding sessions so everyone gets the right information at the right time.
Have at least a session that explains the deal rationale and the plans for the future. For example, acquisition employees need to hear why the company had to undergo a deal, what's in it for them, what's available for them, and the changes they should expect from it.
It depends upon the transaction type, but as I said, it's news for them. Think about what the deal means for them, because some joined the target company for a specific mission or vision.
Now with the acquisition, the vision/mission could be changing. Taking the time to explain will at least cater to that population and give them an idea of what's next for them. If you don't know, then say it. That's much better than saying nothing.
Rebuilding efforts with communications is important. The onboarding needs to be customized, especially for strategic transactions. As for the talent deals, they come in and work on a specific product or project. It's much easier to onboard them because the process is a little closer to your usual onboarding process.
Working with Vendors for People-Focused Integration
For larger transactions, it would be helpful to use advisory services because you might not have seen some of these cases as they might have. They bring you that knowledge and allow you not to make mistakes, or they won't take you a long time to figure out.
Suppose you don't do large acquisitions every two years. In that case, you might need to expand your team, and those advisors will be very helpful because they come with knowledge and specific functions, so they can really help supplement additional processes.
It's the people because dealing with them doesn't come with a handbook. And it's difficult, you cannot please everyone. Sometimes, you don't have audiences all at once. And the larger the team, the more challenging it is because you have different issues coming from different pockets.
Advice for First Timer
Be prepared as much as you can. You can rely on outside resources if you have never done it. There's no shame in having an advisory service. Work with your cross-functional team as tight as possible. Keep your eyes on the rationale of the transactions, share information, and flag issues as they arise.