by Kaija Katariina Erkkilä
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Recently a colleague showed me the following link to the Computer World article: How to integrate an acquired company in just 90 days. I was amazed. Is it truly possible to integrate in such a short time?
I read the article and watched the connected video with great interest. There was also a quite “spicy” comment against the possibility to make an integration in 90 days. The article and the conversation made me think about SPEED in M&A – is it something we should aim at or are there situations, where speed might even be harmful?
Speed Brings Value
From my experience, speed in M&A integration execution does bring value and it correlates to the success of M&A. The expectations of the stakeholders are high and create a momentum to the whole integration. The momentum starts from the very moment the deal is announced. Another critical point is Day One and the time after the ownership changes throughout the first 100 days. This is when people impacted by the M&A want to see how the integration will progress and hear what it all means to them.
During this momentum you set the “tone” for the whole integration. Communication is an incremental part of managing the momentum. However, it is important to note that good management of the momentum does not equal completion of the post-merger integration steps. On the contrary, in most cases it is just the start. To be able to make decisions and achieve the speed requires careful planning and a lot of pre-integration work.
The M&A strategy is the basis for all planning. We need to answer the question: why this merger or acquisition, and what do we, as the buying company, want to achieve with it? Are we looking for new sales or service channel or new technology? Or perhaps there is too much capacity in the market and our plan is to consolidate operations.
For a successful integration, the strategy needs be broken down into clear measurable goals and synergy targets. The people with operative responsibilities have to understand how to prepare concrete action plans with this information.
Unfortunately there is too often a gap between high-level strategy and synergy goals and tangible integration activities. The better the strategy has been divided into measurable integration team goals, the faster the integration implementation work can start and the easier it is to follow its progress.
It is typical for an integration to be short of resources, creating tremendous stress on those involved. Since M&A integration projects are exceptional situations, this dilemma is hard to avoid. But it can be reduced by an early start and continuous upgrades to the post-merger integration plan template. A systematic and structured approach improves the planning of resources and the capabilities needed as well as the preparation of tasks.
Buyer companies may also have “must issues”, processes or tasks they want to be handled their way. These can be anything from financial reporting, ICT, approval governance guidelines to instructions for customer pricing and discounts. Clear and detailed instructions that are readily available in templates for the must issues speeds up integration in the beginning and reduce confusion and misunderstanding.
Systematic examination and learning from the previous cases improve the overall M&A success. True learning includes a thorough and detailed analysis of issues like the process, decision-making, planning, understanding management cultures and leadership. M&A playbooks are often utilized by acquisitive organizations for this exact purpose.
Speed can destroy value
Too much speed in the wrong places at the wrong time can also destroy integration value. Pushing through change too quickly may result in a loss of key people and customers. Leaders need to have sensitivity in estimating when speed actually brings value and when it may destroy it.
People need time
As discussed above people need quick and continual information and communication. But they also need time to digest the changes. The picture below illustrates the time people may require to adjust to different changes.
After the change of ownership, the leaders and key managers of the buyer and acquired company typically review the planned strategy jointly. The decision can take place rather fast, but to implement it in reality requires involving the people and this takes time. The larger the integrated operations are and the more people will be involved, the more time is needed for change and the longer it takes.
The functional role may also impact both the willingness and capacity to adjust to the change. Typically those working closer to the customers, the front-line people, find it easier to adjust to change than the people in intercompany functions. Things like business concepts and technology are deeply rooted in the company’s culture and values. They involve significant tacit knowledge and are more considered as a part of the culture of a company, hence changes to these require a longer time.
By stopping to think about speed in deal integration I realized its importance, but also the complexity involved. If decisions are not made and communicated quickly, people lose focus and things just do not happen. But, if speed means pushing change too harshly, the impact may be the opposite of what was aimed at.