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M&A Imperative: Incorporating the Integration Plan into the Due Diligence Process

As CEO, CFO or Director of M&A, how often have you asked people in your company to assist in the due diligence of an acquisition target, and been met with blank stares. 

“Why me? I already have too much on my plate,” they say. They start looking at  documents, identify show stoppers, and get back to their job as quickly as possible. 

If this happens at your company, you are not fully capturing valuable data that your team is learning during the due diligence phase. Instead of losing this valuable information, it is important to use this time to begin integration planning for the acquisition, and enlist the help of your entire team in this process. 

The first step is to assign one person to lead the team from the start of the due diligence process to the end of the successful integration phase of your acquisition. This person should be a senior level manager that possesses skills in Finance, Operations, People, and Leadership. And most important, they need to devote full focus on this task.

Prior to assembling the due diligence team, the manager should begin laying out a structured plan that begins with your company’s overall objectives with the acquisition. If your company is planning to combine the acquisition target with one of your existing units, the approach will be different than if the target is maintained as a separate business unit, with little integration.

Once the plan is set, assemble a team representing a cross section of your company: Finance, HR, Operations, Marketing, and Contracts/ Legal. All members of the team need to be briefed on the acquisition target, why it is a strategic fit with your company, how it will be integrated into your company, and their role throughout this critical process. They are going to play a significant role in this acquisition, and play an important part in successfully integrating the new company. 

Each functional team member will be given specific areas to consider upon beginning due diligence, always maintaining a focus on the post acquisition integration phase. While the overall plan will contain as much detail as required for each area, I have highlighted a few items to be considered:

·         Finance

o   Review of revenue recognition policies for the new company. Are they consistent with your policy?

o   How will the accounting systems be integrated?

o   Is their internal control system up to your standards?

·         HR

o   How do their benefits compare with yours, and what is the plan to bring them in line with your plan?

o   Are their policies consistent with yours?

o   How does their compensation system compare with yours?

o   What is the communication plan on the acquisition to all employees in both companies?

·         Operations

o   Are there duplicate operations in the same location that can be combined?

o   How will the new operational units report in to your company?

·         Marketing

o   How can we leverage the skills of the new company in our proposals?

o   How do we effectively cross sell our capabilities into the new markets we have acquired, and vice versa?

o   What is the communication plan to customers of both companies? Why does the acquisition make sense? How will it benefit the customer?

·         Contracts/ Legal

o   What is their contract mix?

o   What is their proposal pricing policy?

o   What is their track record for meeting deliverable schedules?

 

Another important aspect of your team’s success is its ability to open the lines of communication with counterparts in the acquired company - and listen to what they say!

Many of them have insight into what is good within the company, and what needs improvement. While some of this will be venting from nervous and maybe unhappy employees, some comments will be valid, and warrant consideration. Talk to your team about listening and making note of these comments. You may never get these honest comments from the executives at the “C” level.

While this is only the tip of the iceberg, it illustrates that a well structured integration plan should start at the beginning of the due diligence phase of the acquisition. It should,  enlist other key players in the organization, giving you an extra few months to plan for the successful integration.  This process should significantly increase your chances of acquisition success.

Peter Dwyer is Co-founder and Managing Director of EdgeStone Consulting, specializing in acquisition consulting and due diligence support to firms in the federal marketplace. For additional information, contact Peter Dwyer at pdwyer@edgestone.net, or review more detailed information at www.edgestone.net.