Growth through acquisition is a high-risk, high-reward journey. Most business leaders understand that prioritizing cost and revenue synergies during integration can drive significant increases in value — often exponential. While closing the deal is like a map filled with targets to hit along the way, there’s no predicting the twists and turns your integration path will take. Yet, when integration is poorly executed, both the acquirer and the acquired can experience a degradation in value that could take years to recover from.
Successful business combination outcomes are not a given, and require careful planning, rigorous management, and precise execution. Often, business owners get caught up in the excitement of closing on the deal and become laser focused on that milestone, only to find that their teams are not prepared or resourced to support the strategic and tactical efforts that follow.
Without an effective integration approach, value degradation can occur for both the acquirer and the acquired, preventing the achievement of the investment thesis that supported the deal. That’s why we are excited to share perspectives on what drives successful business combinations that have been derived from our firm’s support of more than 50 successful acquisition integrations since our inception in 2020. Founder Shelby Faubion and Managing Director LeAnne Perrine share their top five lessons learned:
Lesson 1: Success Depends on the Tone at the Top
Though the integration begins after the acquired and acquiring company sign on the dotted line, the reality is that it’s an ongoing process. Employees at all levels may need to adapt their day-to-day life to the new, post-acquisition norm. To help, company leaders should model the behaviors employees must also adopt.
“We have some clients where the CEO and the CFO are very clearly communicating to their teams that integration is a priority and that it will happen within a defined timeline. We also have clients where leadership does not consistently communicate and allows much more leniency with target date slippage. In the latter scenario, we typically see routine delays, a lower degree of integration within the first 90 days, and negative impacts to team morale and synergy realization. Tone at the top and a culture of accountability are crucial.”
LeAnne Perrine
There are three steps to creating a culture of proactivity around integration. The first two include establishing integration priorities and creating a framework to govern the integration. While many integration managers may stop here, they lack effectiveness without the third step: hand-selecting key leadership to help drive priorities, maintain accountability, and monitor execution until the target level of integration is achieved.
We recently partnered with a private equity-backed client to facilitate its integration, which included several mission-critical milestones with a 90-day timeline. The CEO established expectations from day one, mandating that integration managers justify any milestone that extended beyond the targeted timeline. Once the CEO communicated those expectations and created a culture of accountability, employees followed suit; the client completed 90% of the integration within 90 days of close.
Lesson 2: A Smooth Integration Starts with Defining the Vision…
Post-close integration involves many more employees than the deal itself. This can boost the pace of change, but without a clear vision, it can also build doubt and confusion. Taking time to understand the strategic intent of the merger or acquisition can help galvanize your team around the milestones that matter most.
This can be straightforward if, for example, the acquiring company’s vision is to continue business as usual with financial statements consolidation. But if the acquiring company envisions working with the acquiree to cross-sell to customers, more detailed post-integration milestones must follow.
Potential milestones could include introducing the acquiring company to existing partners, deepening those relationships, or even expanding the acquiree’s current offerings.
Defining the vision of the integrated state empowers leaders to unite their teams around a clear path forward and the accompanying milestones. We generally host two working sessions with each functional team to align on the vision of the integrated state (i.e., the Blueprint). Once the vision is aligned, we also typically facilitate two additional working sessions to confirm the necessary integration milestones, priorities, tasks, timing, owners, etc. Collaborative working sessions with representatives from both the acquiring and acquired company assist with alignment and enthusiasm regarding integration.
Lesson 3: …and Clearly Communicating It
A strategic vision without a communication plan is like picking a destination and charting your course but never telling your crew where you’re going. While integration communication can feel heavy (especially if it involves a headcount reduction), it’s critical to achieving the vision you defined.
“I can think of a handful of examples where we started the integration and leadership from the acquired company was like, wait a second, we were told nothing would change. Those are some pretty uncomfortable conversations that occasionally come up during integration kick-off sessions that should have been aligned and communicated prior to close.”
LeAnne Perrine
An effective communication plan should focus on key stakeholders, which typically include:
Leadership
During a merger or acquisition, the acquired company will typically agree to hit certain targets to earn a second round of bonuses or earnouts. However, the acquiring company will also expect the acquiree’s leadership to help orchestrate and sponsor the integration itself. Without proper communication, these two priorities can compete for the executives’ time, focus and energy.
During one of the integrations we oversaw, the head of the acquired company experienced conflicting priorities. He was focused on meeting the requirements outlined in his performance-related targets, but leadership of the acquiring company expected his full engagement during integration planning and execution.
“I think a lot of that just goes back to clarity on priorities, allocation of resources, and expectations in terms of role.”
Shelby Faubion
Employees
Once the leadership teams from the two companies are aligned, it’s critical to keep employees informed, motivated and engaged. We recommend creating a comprehensive FAQ document and making it available to all employees on day one. The FAQ should clearly state what will happen, why, and when (where possible).
Honesty and clarity are both critical to employee communication. If the FAQ states there will be no material changes to the acquired company and leadership rolls out changes later, employees will lose faith in the direction. Breaking bad news is hard, but overcoming resentment is harder.
Customers and Vendors
While many companies want to shout their integration from the rooftops, you must consider communication with the acquiree’s customers and vendors first; customers can easily become concerned if they learn about the integration indirectly. Include customers in your communication plan so they get their questions answered before news articles or press releases.
“We always advise that there needs to be kind of an offline heads-up phone call about the deal (as permitted) before customers hear about it for the first time in the press release. That sometimes goes over a little better, and it helps build trust and loyalty in the relationship.”
LeAnne Perrine
Lesson 4: Culturally Appropriate Communication Yields Better Collaboration
Many companies operate in more than one country and need to communicate effectively across cultures. Understanding the norms of each is a necessity to ensure communications are effective.
“It introduces this whole other level of awareness and expertise that is needed when integration teams include members from multiple countries, multiple cultures, and perhaps even speaking multiple languages. The approach we take needs to adapt and accommodate. It’s important we understand any sensitivities and variances prior to kick-off.”
LeAnne Perrine
For example, during an onsite, a client informed Perrine that the standard methodical and inclusive approach leveraged by Vector Advisory for integration planning may not be received as well in certain non-U.S. regions due to hierarchical communication norms. A better understanding of communication style and professional etiquette across regions/cultures, as well as allowing adequate time for all team members to contribute regardless of their native language, is necessary to help remove cultural barriers and lead to enhanced collaboration.
Lesson 5: The Most Successful Integrations Start with the Right Talent
Successful integration ultimately comes down to people.
Executive leadership’s tone at the top, adequate integration leadership, and an effective integration management office (IMO) are examples of where the “right talent” is imperative.
According to Perrine,
“From an IMO perspective, you need to have an appropriately skilled individual or individuals with the capacity to manage the integration cross-functionally.”
This could be an internal team member with the right mix of project management skills, overall business knowledge, and emotional intelligence. However, this role is often difficult to find internally, and even if it is found, he or she often has zero capacity due to the significant value this individual is already contributing to the organization due to their unique skillset.
“Key leaders selected to participate in integration already have a full-time job before the closing, and then they are tasked with adding integration responsibilities on top. In many cases, the execution is more complicated than initially anticipated, which can lead to frustration and extended timelines. This is where we can help. We can alleviate some of that burden, and we can roll up our sleeves to assist with execution.”
LeAnne Perrine
An independent third party with deep and specific expertise in merger and acquisition integration can offer the added capacity and skills you may need to integrate smoothly and successfully.
Keys to Success: Communication, Planning, Execution & Management
After 50+ integrations, we have learned that integration is rarely easy. Culture change is hard, hitting targets is hard, and being available for post-close integration calls, meetings, and activities can be overwhelming and taxing for team members with limited capacity. But it does not have to be overly complicated or risky. Fundamentals of integration success really come down to communication, planning, execution, and management. Communication, as you’ve seen through this article, is central to integration success, beginning with the tone at the top and ensuring alignment of vision and expectations across the organization. To quote Benjamin Franklin,
“If you fail to plan, then you’re planning to fail.”
This quote certainly rings true for business combinations. Finally, successful outcomes are surely dependent upon the people managing and executing the work, which requires strong leadership, rigorous governance and oversight, and effective resource leverage and allocation.
While integration is inherently complex, you can enter and complete the integration process with clarity and confidence. We are sharing the lessons above so that business leaders and integration leaders can leverage and incorporate into their processes. We also want you to know you are not alone, and we can help simplify and streamline your approach. After all, there is one thing we know for sure: how you structure the integration approach has a direct impact on your integration success.