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It’s widely reported that half or more mergers and acquisitions ultimately fail. But it doesn’t have to be that way. To look at why so many deals fail during the integration process and learn how to ratchet up the chances of success, we talked with three interim executives with a track record of dozens of successful mergers and acquisitions.
You can watch the video to hear everything they had to say, click over to read our edited transcript, or read on for a summary of the highlights.
It’s All About the Playbook
Sarai Schubert, who has held operations roles at numerous companies and overseen her share of mergers and acquisitions, says post-close integration success revolves around a playbook that lays out the integration strategy.
That playbook spells out “where you want to be and where you’re trying to expand and what your gaps are,” she said during a webinar hosted by InterimExecs President Olivia Wagner.
Kim Marren, an interim Chief Financial Officer who has worked with more than 25 clients through a wide range of industries, puts it even more bluntly: “You need to take off the rose-colored glasses and look hard at your current organization. And be ruthless in defining your weaknesses and where you need to shore up your financials and your operations.”
It’s easy to be lured in by the excitement of a potential acquisition, but “first and foremost, be realistic about who you are and be realistic about who the other potential players are as well. Because if we’re not, we’re just setting ourselves up for failure,” Marren says.
The playbook does more than help you identify the right target. It acts as a roadmap to post-acquisition integration.
Post-Acquisition Integration
It’s critical that the post-merger integration plan be as detailed and specific as possible, Schubert says. The playbook lays out the vision and is the guiding tool for keeping everyone focused on the same goals.
“I like to think of the 80/20 rule. Eighty percent is going to be your focus. This is where you’re going to put a lot of your efforts,” she says. “’The reason why we’re doing this is because we need to get X, Y, and Z done right.’ And whatever that thesis is and the results that you’re expecting should really build that playbook.”
Having a defined playbook that lays out the focus for the first three months and the following phase or phases is key, she says. “Otherwise, you’re focused on too many things and nothing will get done.”
Focus on People
Another critical piece of the integration plan is the people, says Cristina Iaboni, a long-time interim Chief Human Resources Officer.
“Do you have the talent in-house, or can you acquire that talent to make sure that the due diligence process, the integration efforts afterward, all of those are aligned,” she says.
The playbook needs to identify the key employees who will lead through the merger and oversee the post-acquisition integration.
If you don’t have the right key employees before the deal closes, “you’re starting off on the wrong foot [and] you’re going to end up truly on the wrong foot,’ she says.
Lack of experience is a key reason half or more of all mergers and acquisitions fail. That suggests companies do better when they adopt best practices and learn from experience.
Communication is Key
Cultural integration is one of the toughest M&A integration challenges that will be addressed in the playbook.
Here, the employees are the key stakeholders.
“For the clients I’ve worked with, the difference between success and failure has been paying attention to the people and the details,” says Marren. “When we’re doing an acquisition, people get scared. Doesn’t matter how strong the leadership team is, doesn’t matter how positive the communications are. People get scared. They clam up, they leave.”
But how early in the process can you let people know the plan?
It depends, the experts say. If the acquisition is a complex deal that will require significant consolidation to achieve economies of scale, that likely means the dealmakers will keep mum about integration activities at least over the short-term, releasing information only when it’s time for the deal to close.
But, Marren says, the minute it’s possible, companies should opt for “open, direct, honest, consistent communication. People read between the lines. People figure things out. Sometimes we’re right, sometimes we’re completely off base.
“We don’t want key parties getting nervous, because when we get nervous, we don’t optimize our performance and we do stupid and sometimes bad things. Absolutely, there’s a time to share and a time not to, but when we get to the point that we need to start sharing information, overcommunicating is better than not communicating at all.”
Successful Integration Benefits from Outside Help
When is the right time to bring in outside help?
“I would say sooner than you might think,” Marren says. “We don’t know what we don’t know, but when we bring someone in that’s an expert in their field, we immediately see the difference.”
And if you wait too long to add the right people to the integration team steering committee, “it winds up being a much more costly endeavor,” she says.
“Every single one of these transactions is a little different. So if you’ve had someone who’s been through the process a few times with different types of industries, size, organizations, cultures, they’re not caught by surprise, and they can pivot and modify that playbook a little to make sure that they’re asking the right questions, capturing the right details, the nuances, making the entire team comfortable, so that we’re all able to openly share information and ask questions without feeling threatened, then the end result is much more successful,” she says. “We learn from the best.”
The upside of our gig economy is that the help you need is available. A rock-star InterimExecs RED Team member with years of M&A experience across multiple industries can be onsite in as little as 48 hours. Whether you need an experienced Chief Financial Officer who can guide you through due diligence, a CHRO to oversee integration of the two companies’ cultures, a COO who can create an organizational structure that realizes the full potential of the acquisition, a CIO to integrate IT, or a CEO to run the combined company, there is a skilled interim executive ready to help.
Reach out to us for a confidential conversation about your company’s needs.
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