Standing Up an M&A Integration Team
– When “A” Players Hurt
By Global PMI Partners
Your business is humming along. Now with new Private Equity funding, or with a stockpile of dry powder in cash from corporate success, it is time to expand into new markets, build out your product base, and look to take over your competitors.
This strategic move calls for inorganic growth – to acquire your competition and/or companies with products adjacent to your business.
Acquisitions are fraught with pitfalls if not done right. A critical area to focus on is integration management to ensure acquired companies are integrated into your business successfully, driving both cost and revenue synergies. At Global PMI Partners, we help our clients stand up integration teams, tools, process, and governance. In this article, we discuss how internal resource allocation for integration efforts is a key to success, and we highlight how “A” players incorrectly assigned to an integration team can surprisingly hurt integration outcomes.
Given the strategic importance of an acquisition, oftentimes the “best of the best” of our client’s company, the “A” Players, are involved in the integration work. This seems like a wise move, as these resources have a track record of driving success. However, there are pitfalls to identify and mitigate.
With our IMO MobilizationSM approach, we have implemented over 350 integrations to date. We leverage our clients’ internal team members prior to deal close to maximize internal expertise development, and minimize spend on external consultants – the goal being that when an acquisition closes, detailed integration work plans have already been developed and are aligned to the deal thesis, proper integration tools and templates are at the ready, and integration work is well underway—driven, where possible, by internal team members and not consultants.
Given the strategic importance of an acquisition, oftentimes the “best of the best” of our client’s company, the “A” Players, are involved in the integration work. This seems like a wise move, as these resources have a track record of driving success. However, there are pitfalls to identify and mitigate.
A Case Example of When “A” Players Hurt
The VP of Sales is heading up the sales integration team and is chartered with achieving sales synergies for cross/up-sell opportunities and cost synergies to optimize sales regions. In past years, this executive has driven sales very successfully to make the company what it is today, and as such, holds great implicit and explicit authority within the executive team.
The VP of Sales understands their compensation depends on achieving sales targets that were developed prior to the acquisition, and they continue to focus on ongoing sales above all else. Secondly, the VP of Sales is also passionate about selling – this is what made them successful. Managing an integration plan is not exciting work and is downright painful, causing integration task management to always be at the bottom of their priority list. Thirdly, the VP of Sales is not used to driving internal projects and has a minimal understanding of project management best practices. And fourthly, with implicit and explicit authority in the business, they drive in direction that they feel is right, creating risk that the integration tasks are optimized for the Sales team and not for the company as a whole.
Given the goal to hit their numbers, the VP of Sales does not follow integration process, attend meetings, or have time to collaborate with other integration work streams. Other integration leads see the ability for the VP of Sales to avoid integration obligations and also follow suit by focusing on their normal day jobs. The integration work doesn’t meet deadlines, the integration and related synergies fall by the wayside, and the integration never gets fully completed. At the end of the M&A journey, with these counter-forces that work against maximizing both cost and revenue synergies, the VP of Sales will not get fired if they keep their sales pipeline flowing and meet their numbers. If the VP of Sales focused on integration to a point where they missed sales numbers in their day to day work, they’d be in much greater jeopardy.
Similar scenarios can be detailed for a VP of Marketing who is passionate about customer events around the globe and does not have time to address integration tasks, a VP of Product who is laser focused on getting the next product out and not focused on the integration, or a VP of Corporate Development who was supposed to support the Integration Management Office, but is more enthralled with moving on to the next acquisition in the M&A pipeline.
Methods of Mitigation
To mitigate when “A” players hurt an integration, the following steps can be implemented:
Align Incentives
Take a close look at “A” player incentives for integration involvement. In many cases integration results cross calendar years. Determine if any incentive adjustment is needed to align with longer term success.
Ensure the Right Skills are Present
Just because an executive is wildly successful in their area does not mean that they’ll be successful on an integration team. Assess the executive’s teaming skills and project management skills that are utilized during an integration. Also be aware if they will be passionate enough about the integration to stay engaged. If the executive fails in any one of these areas, have the “A” player delegate to a team member who is more prepared to deal with integration responsibilities.
Commit to Responsibilities
Once integration assignments are made, hold a kickoff meeting with the integration team and executive stakeholders where integration team leads describe their charter for the integration: end goals, resources engaged, key tasks, and key risks, issues, and dependencies. Standing up and stating this commitment (and discussing any disconnects with the integration team audience), establishes a stated responsibility to get work done, where it is much harder to pass off responsibilities.
Resource Level the Integration Team
One of the biggest challenges and excuses to not getting integration work done is that team members are double booked with day-to-day activity while being part of an integration team. This is reality – it is not an option to do harm to the core business and focus more on the integration or vice versa. Ensure the integration plan has a tight timeline to get the team back to normal operations quickly, and ensure resources are leveled across teams up front to allow for the increased integration workload.
Maintain the Cadence of Meetings
Ensure team leads make it to recurring meetings, such as weekly integration management office (IMO) meetings. Unless there are extreme circumstances (systems are down, transformative client meeting that can’t be moved), ensure that attendees make it to these meetings – and help by making these meetings efficient. If an “A” player has more important things to do and this becomes a pattern, this is sure to freeze integration progress – track missed meetings closely and mitigate to ensure a pattern of missed meetings does not occur.
Work the Task Management Process
In addition to ensuring consistent meeting attendance, another area is to ensure each integration work stream’s tasks are well thought out and are being managed to completion. If an “A” player is covering (making excuses) for integration team members not getting their work done to focus on non-integration initiatives, this is a sign of trouble. To mitigate this, ensure that integration plans down to the task level fully support the deal thesis and specifically address cost and revenue synergies. If this work does not get done to focus on “more pressing tasks”, then a discussion can be had about how these delayed tasks impact the integration and directly impact the realization of synergies. By working the process and quantifying the impact of task delays, at minimum this allows for better decision making on where level of effort should be focused vs. just reverting back to normal operational tasks that tend to have higher implicit priority.
Final Thoughts
M&A integration activity should be well planned with a majority of planning (and 100% of day one readiness efforts) completed before deal close. As part of this effort, governance, organization, process, and tools should be developed with a keen eye towards the best resources to take ownership of integration activities. In this process, ensure integration leads and team members commit to and are motivated to follow established integration priorities. Ensure “A” players are inspired, understand their role, and are managed appropriately to achieve the best outcome for your business.
Post-Merger Management
Value Creation in M&A Integration Projects
This book pools the current know-how, and closes important knowledge gaps, to offer hands-on advice and practical answers to the many ‘how to’ questions relating to merger implementation. It also explains the broader M&A context in which integration projects are rooted, providing a crucially important understanding of how to assess the chances of realizing synergy potential and evaluate integration risks. The book demonstrates how integration can succeed and provides a candid overview of everything that needs to be done to navigate one of the most challenging areas of entrepreneurial activity.
Webinar: M&A as a Low Risk Growth Strategy
Webinar: M&A as a Low Risk Growth Strategy
The presentation shown can be found here.
By GPMIP Senior Executive Advisor, Robert Heaton
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