by Lauren Dever
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The risks of not right sizing your integration span from stunted growth to missed opportunity and frustration. For instance, if you oversize your integration with resources and planning, you lose speed and agility; if you go too light, you can overlook critical aspects of culture and synergies.
Given the complexity of right sizing integrations, it is not surprising that failing to maximize deal value due to poor integration practices is all too common. To eliminate this pain point, CREO, Inc. has identified four critical factors for right sizing post merger integration.
Key Factors for Right Sizing Your Post-Merger Integration (PMI):
- Deal Thesis/Investment Philosophy
Based on these four core factors, there are five “levers” CREO recommends adjusting — specifically, pull the hardest on the ones that will make the biggest impact for your deal:
- People Focus
- Third Party Support
Let’s dive deeper into each factor and how specific levers influence them. The following can serve as a M&A PMI sizing template or framework to get you started.
The following must be considered when addressing and analyzing cultural fit and how it will impact integration: leadership allegiance, optimism, leadership styles, alignment, and brand loyalty. In turn, the levers most relevant to culture are people focus and governance.
The most important piece of culture is that it cannot be the last thought, rather it has to be the first thought. This is because culture is the most critical risk to be managed when integrating companies. Stakeholders must ask how do these two pieces go together? Do the two companies share the same values? Do the management teams respect each other? Is it possible for these two entities to come together and share the same positive view of the future?
Maturity factors encompass foundation of people, process systems, M&A experience, executive sponsor experience, and PMO experience; therefore, the levers related to maturity include governance, people focus, and third party support. While maturity is relevant for all company sizes, it becomes even more critical as you approach smaller organizations.
CREO believes in the motto “asking for help is a sign of wisdom, not weakness.” As you uncover information related to the target’s maturity, and considering the third party lever specifically, remember there might be things the target is not equipped for simply based on size or lack of experience. It is okay to ask for help since there are times necessary resources might only exist outside of a company’s organization.
3. Deal Thesis/Philosophy:
There are five foundational pieces to the Deal Thesis factor: investment philosophy, synergies, acquisition strategic plan, investor’s asset plan, and transaction type. Governance, scope, and pace are the levers you would adjust for right sizing integration.
As CREO knows, most companies engaging in M&A are focused on making themselves better and more valuable, i.e. they are looking for inorganic growth to drive innovation and value. All of these lofty goals must have a specific deal thesis at their foundation.
The buy-side needs to get into the psyche of the target organization in order to understand any inertia going into the transaction; given this, the following areas should be investigated: commitment, strategic priorities, executive alignment, and high risk issues. With these elements in mind, the key relevant levers related to mindshare are people focus, scope, and governance.
CREO has first-hand experience when the leadership team lacks deal involvement and context, which leads to a lack of alignment and incentive to prioritize integration. To ensure the organizations have the proper mindshare, the focus must be on people and scope to ensure a successful integration.
Final Thoughts & Using Midaxo to Right Size Your Integration:
CREO’s success lies in its four factor thinking and analysis; it has been pivotal for their client success. Midaxo’s complete M&A solution supports and aligns well with this approach. Namely, Midaxo assists with managing the flow of communication and decisions — ideal for all deals. Moreover, its flexible platform scales up and down to meet the needs of all sized companies engaging in mergers and acquisitions and provides important support to their consultants.