June 27, 2023 //
In this post, I want to highlight a critical and often overlooked piece from the very end of the acquisition process that needs to be carefully considered from the beginning—Post-Deal Integration.
When the ink has dried, and the keys are in your hand, how will you integrate the new business into the daily reality of your existing operations?
A helpful warning here—the M&A Advisors you choose to work with should be interested in your company’s strategy for post-acquisition integration from the start. How you plan to mesh operations with your new company will tremendously impact how and where your advisory team searches for prospects. If it’s not a topic of conversation in the first conversations with prospective advisors, proceed with caution.
It’s shocking how often well-run companies put very little thought into the complexities of corporate integration before an acquisition. That is dangerous—a business can suffer real damage from a careless approach to the matter. Often, a company will thoughtlessly follow conventional wisdom, and so long as the acquisition represents less than ten percent of total revenue, they will try to jam the new business into the existing operation and hope for the best. Even if you manage to avoid disaster with that approach, you still miss a great opportunity for your business.
That missed opportunity is why your M&A Advisors should be centering your collective strategic thought on integration at the outset: tailor the search process for companies that will gel with your integration plans, and you will end up with a short list of prospects with the exact ingredients you need. If you have no idea of the form integration will take, you risk missing out on some real alchemy.
An example: I know of a manufacturing company that recently acquired a much smaller operation specifically to meet a gap in their business that they had strategically identified.
This company focused on high-volume manufacturing with long process runs—a constant stream of products rolling off the lines. However, the small company they bought was an entirely different animal that specialized in custom, one-off production in the bespoke market.
The existing company was large, busy, and driven by a clear strategic vision, and the custom work that the new acquisition excelled at was a necessary part of that vision moving forward. But how would such different entities operating at such different scales mesh?
Their solution was ultimately successful, but the reason it worked had a lot to do with the smart questions they asked about integration at the start of the buying process: How will this work practically? How will differing scales and timelines between high-volume and slow-custom impact our systems? How can we prepare our systems and logistics in advance to handle the disruption? How will we manage shared workflow, performance expectations, and fulfillment? How can we keep the two entities appropriately separate? What kind of companies can we integrate with our own that will be transformative?
Asking these kinds of questions as early as possible is key. The more fleshed-out our vision of post-deal integration, the better able we are to identify compatible characteristics in prospective acquisitions when we start our search of the markets. This company successfully navigated its post-deal integration because it was a focus from the beginning.
It’s also important to consider the more intangible effects of integration on your company as early as possible. New employees, a pre-existing corporate culture, innovative vs. established procedures, and unexpected new friction points will all have immense, disruptive impacts on your business when the integration process begins. Achieving early consensus on the approach you plan to take together will go a long way to easing the transition.
There’s reason to be excited about your opportunities after the acquisition. Successful post-deal integration can often be a refreshing force in your business. If you plan for it, get wise counsel, and create time and space for the new company to be left alone and adjust to the transplant, you will find it breathes life into your old systems and offers a fresh perspective on your overall mission as a company.
I want to caution you that not all M & A firms are created equal when it comes to the attention they pay to post-deal integration. I like to see people succeed; I want to see the transactions that Stillwater Capital oversees result in long-term growth for the buyer’s company. Part of that is ensuring that our clients prepare for the long-term impact of an acquisition. Our M&A Advisors at Stillwater Capital will make sure you are set up to continue your success long after the deal is done, right from the start. You can begin the conversation with us here.
Whatever direction your company is headed, I invite you to start a conversation about the acquisition process with us at Stillwater Capital.
Written by: Douglas Nix