Post Acquisition Strategy & Integration, Tips for Success

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Growth by acquisition is a popular private equity strategy. After the deal closes, investors expect a real uptick in EBITDA by leveraging synergies — but this doesn’t happen automatically.

The real challenges start after the deal closes.

Combining complementary businesses to gain market shares is a common strategy. However, many companies struggle because they underestimate the complex effort involved in integrating two separate entities.

Consequently, investors experience delays in returns on their investment. Many investors and companies underestimate the difficulty of the integration process, failing to plan and allocate resources appropriately.

In the end, the integration goes poorly, delaying or even derailing the expected benefits.

How do you ensure a smooth and truly effective integration of people, processes and systems that enables more rapid time to value? 

We’ve compiled and detailed 8 critical guidelines based on our successful track record with multiple private equity clients in the post-acquisition integration phase to accelerate time to value.

Post Acquisition Strategy for Private Equity Firms:

1. Designate an Integration Team Leader

Someone must spearhead the process.

Generally, the designated change agent is the CFO of the parent company, but it can also be an experienced controller or other senior finance leader who has the bandwidth to develop and own the integration plan — from start to finish and authority to drive the process.

The team leader must possess the adequate skillset, resources and ownership to drive integration forward. This leader must also have designated time to be fully focused on the integration.

Using an “after hours approach” to an integration process will prove unsuccessful and waste precious time.

2. Identify the Acquisition Goals & Desired Future State

First and foremost, identify why you did the deal.

This will help you to understand the primary sources of value around the acquisition and ensure these are incorporated in the integration.

Key drivers of deal closings include:

  • Efficiency and scalability of the combined financial processes
  • Leveraging systems and technology to support the new entity

Once the goal is defined, the integration plan can start to take shape.

A good plan takes into account all of the short-term integration tasks as well as long-term strategic goals that will shape the company’s future.

There is no doubt that adjustments will be made along the way, but starting with a focus on the end goal helps to ensure strategic decision-making along the way.

3. Align Leadership with the Plan

An effective integration process will impact all keys areas of a business, including sales, operations, finance and people. 

Ensure leadership has a solid understanding of your vision in each of these areas and create a common message to be shared throughout the organization.

Naturally, your investors must agree with your vision, but it falls on your management team to develop the plan and clearly articulate that vision across the organization.

Caution and respect are crucial as you work your way down the org chart. Staffers in both the parent and the acquired company are understandably a bit nervous about their future.

Let them know they are valued and appreciated. People are more likely to be invested in an integration process if they understand the positive impact it can have on their future with the company.

Furthermore, engaged and invested employees are generally less likely to leave. Oftentimes, the highest performers look for an off-ramp in the early stages of an integration.

It may be wise to reaffirm their value with extra insight about future plans, and if necessary, a retention bonus or other incentive to stay through the transition.

4. Put People First & Identify Key Employees

Understanding and appreciating the human capital of the acquired company is often last on the list, when in fact, it should be the priority.

All businesses depend on personal knowledge, skills and relationships. It is part of the intrinsic value of the enterprise acquired.

Identifying key players at all levels allows you to preserve their valuable skills, experience and expertise for the future. Management must communicate clearly and often about the integration process.

Transparency across the organization is never more critical than post-acquisition. In most cases, jobs will be eliminated due to the acquisition.

The integration leader must have a plan, communicate it, and execute effectively. (This is also a good time to consider retention bonuses or incentives for key talent and develop a contingency staffing plan in case of employee departures.

5. Document Business-critical Processes & Systems

Many organizations assume that the acquired company can simply adapt the way it does business to fit the parent company. 

This mindset can cause significant difficulties and failures. The acquired company has developed processes for specific reasons.

Failing to delve deeply into those reasons can cost you customers and employees.

You may also run into issues such as customer or regulatory compliance mandates that are not reflected in the processes of the parent company.

Hopefully, the company has the critical operating and financial processes well documented. If not, now is the time to address this issue.

In the middle market, companies that are acquired and rolled up into larger organizations tend to be unsophisticated in terms of documented processes and integrated systems.

The acquired company may not have an Enterprise Resource Planning (ERP) system in place, and many processes may be entirely manual. 

Word to the wise: information about processes may largely reside in the brains of key employees. This is yet another reason why it pays to secure employee trust and cooperation up front.

6. Inventory the Quality and Completeness of Data

Whether it resides in the CRM, an ERP or other business systems, data from the acquired company will have to be imported into the systems of choice.

Clean combined data is mission-critical to providing clear operating metrics. Be prepared: the newly acquired company may not capture as many customer datapoints as the larger, more sophisticated parent company.

Having a specific data migration plan should be well-thought out to ensure the integrity of the data is maintained and that any synergies from having a larger data set can be fully leveraged.

7. Compare and Evaluate Gaps & Overlaps

Once you’ve fully documented people, processes, systems and data, compare the two entities to identify gaps and overlaps.

Armed with this information, you can identify which company has the best process for each category and refine your future-state vision.

For example, if you discover that the acquired company lacks certain customer data that are critical for the parent company, you will need to strategize a way to build a more unified data set.

Or, if you find out that the acquired company has innovative workflows that would deliver significant time savings if adopted across the larger combined organization, you can plan to implement that workflow in your next steps.

The tactical plan to execute the integration will likely best be achieved in phases. With the documentation created up to this point, the company can identify the key people, processes and systems it needs for its future state.

8. Identify the Right Technology Backbone to Support the Combined Businesses

Based on your initial planning and thorough discovery phase, you now have all the information you need to select a unified platform for a more robust and efficient organization.

This may be the parent company’s existing ERP or a totally new solution.

Bringing It All Together

Combining businesses and leveraging synergies across the organization is a common investment thesis.

It can provide the ability to reduce and share common costs such as marketing, technology and finance while enabling more effective cross-selling to customers.

If the post-acquisition integration is properly planned, has adequate resources and is communicated across the organization in an effective manner, the true value of the investment can be achieved.

Related Insights for further reading:

Need Pre or Post-acquisition Help?

As a go-to partner for private equity firms and their portfolio companies, we help clients create value, manage risk and seize growth opportunities.

We have a large team of consultants ready to support you with asset-optimizing private equity advisory services — including finance and technology transformation, operational improvement, and ERP implementation and systems integration.