How to Choose the Merger Integration Team
By Sergio Bruno, Italy Partner at Global PMI Partners
Here we are! Deal done!
You are the CEO of company A, who has just bought company B.
Your shareholders have just told you: «we expect the two companies will work together as one company before the end of the next half year! »
Rather challenging, isn’t it?
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Let’s be pragmatic:
A basic rule of Post-Merger-Integration says: «Integration is not Business-As-Usual! »
It is so obvious when we read this statement written here!
But when we go back to our chair, and we must choose the people that will be part of the integration team, then we suddenly forget this simple statement.
Question: «Who will lead the integration of the two Finance and Accounting Departments? »
Answer: «The CFO’s of the two companies! They have managed the Finance and Accounting of the two companies for 10 years, they are the best people who can do that ».
And sometimes this is true.
But only “sometimes”: Being a good CFO requires a set of skills and competencies; being the integration leader for the Finance and Accounting workstream requires a different set of skills and competencies since – we know it from above – “Integration is not Business As Usual”.
I’m not saying that picking the two CFO’s is always the wrong choice. Sometimes it is the best choice.
You have to consider carefully if these people have the set of skills and competencies required by the integration which is not the same set of skills and competencies required by Business As Usual.
This brings to the first rule on how to choose the right integration team: choose the people based on their integration competencies, not based on their Business-As-Usual competencies.
[In a future article we will talk more in detail about the competencies required to perform well during a Post-Merger-Integration]
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Let’s re-use the previous example: we must integrate the two Finance and Accounting departments of the two companies; we realized that the two CFO’s have good integration competencies. Both of them, in their past professional lives, went through integration experiences in person.
But this is not enough in this specific case.
What will the final org chart of the merged company look like?
We will have just one Finance and Accounting department for the merged company.
This means that we will have only one CFO. We now have two CFO’s. and both of them have been chosen to work on the integration. What will happen when the project they have been asked to work on – the integration project – will be completed?
One of them will become the CFO of the merged company. And what about the other one?
There are some options:
- He/she will become a deputy CFO of the merged company
- He/she will leave the company on his/her own initiative
- He/she will be “kindly” asked to leave to leave the company
The last two options are not so a happy ending. The company can make this ending a bit happier by giving him/her a good severance, but nonetheless it is not a happy situation. Consider that the severance cannot be huge: generally, in integrations a lot of attention is devoted towards cost cutting, cost saving, synergies, etc.
The first option sound less sad. There are some cases where it can also be a good opportunity. For example, when company A (the acquiring company) is much bigger than company B (the acquired company). In this case, being the deputy CFO of a large company can be seen as a promotion compared to being the CFO of a much smaller company.
If the CFO of company A is close to retirement, it is even better for a young CFO of company B.
But, unfortunately, situations like these are more exceptions than the general rule.
The general rule is that you cannot chose an integration team member, ask him/her to work hard and then ask him/her to leave the company as a prize for the work done. And, by the way, the faster he/she works in completing the integration, the sooner he/she will be fired!
Not good. Not good for the future health of the company.
We must preserve the ethical footprint of the company: if a company behaves in a bad way towards the integration team, then all the employees will lose the trust towards the company and this can have a tremendous impact on the productivity in the future.
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Do you already have a picture in your mind of what the future organization chart (org-chart) of the merged company will look like?
I guess the answer is “yes”.
If it is not, then this is a point that needs to be addressed very soon!
If you already have the final org-chart in mind, then consider it in choosing the people for the Post-Merger-Integration.
The reason for this is that people are more motivated if they know that they are part of a big picture and if they feel they contributed to the creation of the organization role that they are going to cover.
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Do not forget feelings of the people.
This is the last suggestion and the most difficult to adopt.
People do not always tell you their feelings. For several reasons:
- They are afraid of the potential consequences
- They perceive the environment will not accept them talking about their feelings
- They do not know them exactly
But you, as an integration manager, cannot ignore how someone could feel of you choose him/her to be part of the integration team.
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In this article we gave some advice about how to choose a good integration team. Here is a short recap:
- Focus on Post-Merger-Integration competencies and not on Business-As-Usual competencies
- Do not choose people who will put you in a position where you will not be able to behave ethically
- Keep the future org chart of the merged company in mind when you choose people
- Consider the feelings of the people involved in the integration
We are aware that when you are working on an integration project with all the constraints, time pressures, etc. it may not be easy to implement them!
This is one of the reasons why we in GPMIP employ only senior people in integration projects.
Italy Partner, GPMIP
Sergio Bruno is a US Partner for Global PMI Partners, an M&A integration consulting firm that helps mid-market companies around the world by delivering exceptional consistency, speed, and customized execution on the complex operational, technical and cultural issues that are so critical to M&A success.