Post-Merger Integration Plan Critical for Long-Term Success

The PR transaction has closed. The buyer wires a multi-million-dollar transfer into the seller’s bank account. The staff members of both buyer and seller are notified. The press release announcing the deal has been distributed across the business wires online, sprinkled with quotes regarding a “win-win” for both firms, and, naturally, “new digital and marketing capabilities” that the acquiring firm will now be able to offer its clients as a result of the merger.

But now that the marriage is official, how do both sides ensure that the merger starts off on the right track? With little time for honeymooning, the onus is on senior managers to have an integration plan ready to put into action.

Throughout the rise of the tech economy in the early 2000s, the Great Recession, its recovery, and the current economic climate, the post-merger integration strategy has remained the same:  Integration must start in earnest the day after the Letter of Intent (LOI) is mutually signed, with barely time to wait.

All Hands-on Deck

The post-merger plan should be outlined and distributed to all executives. An executive who is very knowledgeable about HR and merging of cultures, would be good to lead the effort. Retaining a consultant, specializing in how to merge diverse cultures and harness different skillsets, is another option.

Either way, sans a legitimate post-merger integration plan — with benchmarks baked into the process — the marriage is doomed to fail.

As the buyer and seller bring the post-merger plan to bear, it’s imperative that the principals involved in the deal check their egos at the door.

It sounds pretty basic, but cannot be overestimated, as I’ve seen perfectly promising transactions blow up because of unrealistic expectations from one side or the other (or both).

CFO Calls the Shots

The CFO and her accounting department will play a key role during both the planning and execution of the post-merger integration plan. The IT department, dear to both PR and marketing executives, is another major player, working alongside HR and, in most cases, the COO of the firm.

The CFO from the acquiring firm already has a lot of intel about the seller firm. She will have incurred dozens of hours analyzing seller clients, fees, billing practices, time management systems, growth strategies, and synergies.

This is a major time commitment that should take place very early on during due diligence, which is typically 60-90 days after the LOI is signed. It is imperative that financial procedures be put in place “prior to” closing, and the CFO must manage this part of the process.

Merging HR Policies

One of the first items on the checklist is to integrate any new HR policies and vet such policies with the CEO and/or owner of the seller firm. If the buyer is a global firm, multiple meetings need to be set up with Managing Directors of the various offices so everyone is clear regarding cross-referrals and expanded products and services.

Steps to integrate the benefits program of the seller staff into the acquirer’s HR program should be airtight. HR must integrate flexible work policies stemming from both firms, including diversity and inclusion programs, hidden synergies, and cyber-security protections — a major cost and growing necessity for firms of all sizes.

All seller work-in-process, earned but not billed as of the closing date, must be billed and collected by the buyer and given credit to the seller. Seller staff must also be taught (and integrated) into the buyer time management system and expense reimbursement policies.

Vendors, who are sometimes an afterthought amidst all the moving parts of a business transaction, are an important component for the post-merger plan.

Businesses working with the seller company should be paid in full just prior to closing. Accounts receivable not collected as of the date of closing should be separately tracked, with the seller getting paid as the receivables are collected.

For a seller to achieve the value pegged to their entity at the outset of the transaction, the post-merger integration plan should be seamless, with little to no bumps in the road if it’s executed correctly. Leadership must be extremely pro-active, with a laser-like focus on the common vision for success detailed in the post-integration plan.

 

Rick Gould is managing partner of Gould+Partners.