Acquiring another company is the fastest way to expand a business, although bringing a new company into the corporate fold is rarely straightforward.
David Filmer, head of M&A at Harrison Drury solicitors, has set out some of the key action points.
Purchasing a business and integrating it into your existing one is a powerful way to create growth, but significant pitfalls must be avoided in what is invariably a challenging process.
With figures showing that two in three acquisitions fail to achieve pre-merger goals, it is crucial to hit the ground running to reduce risks and maximise benefits.
Here’s a list of nine must-do activities to ensure your integration process runs smoothly.
1. Corporate culture clash
Never underestimate the impact of a corporate culture clash between the merging businesses. Otherwise, there is a real danger that different approaches and attitudes will undermine the broader integration process.
2. Acquisition management
Look at how your acquisition is managed and take a flexible approach to organisational issues, rather than rigidly imposing your own structure. The departure of key managers after an acquisition negatively impacts performance.
On the flipside, a properly handled post-acquisition integration plan will have the opposite effect.
3. Autonomy responsibilities
Be careful about taking away operational autonomy from the acquired company’s management team. The last thing you need at the start of your new partnership is a demoralised management team, or worse still, a confused one.
4. Clear communications
Similarly, discontent among your workforce can derail any merger plan, particularly in the services sector, or in businesses that have employees with a high level of influence.
Therefore, ensure you establish clear communications procedures from the word go, and make sure your employees know what changes are going to be made and why.
5. Post-acquisition attention
Take another look at the due diligence report for the acquisition and locate areas identified for post-acquisition attention. These might include poorly drafted contracts that need to be strengthened or clarified.
6. Contracting processes
Ask yourself if the acquired business’ contracting processes are effective. They may need to be brought in line with the group’s, for example on export control or payment terms. If this needs to happen, make sure it does as a matter of urgency.
7. Purchasing contracts
Establish if there is any cross-over relating to purchasing contracts. Sometimes you can make significant savings by removing duplicates or renegotiating contracts. You may, for example, be in a position to take advantage of volume discounts.
8. Insurance arrangements
Review your group’s insurance arrangements and ascertain whether the business you are integrating needs to be incorporated into the group scheme.
9. Ongoing support
Ensure you give your compliance team all the support they need to ensure the acquired business’ processes and procedures are in line with the group’s.
David Filmer is head of the mergers and acquisitions team at Harrison Drury and advises businesses and business owners across the region on corporate and commercial law issues. For further advice on post-completion integration and other issue relating to mergers and acquisitions, email David or on 01772 258321.
See how our solicitors make it possible for businesses in these situations by reading more on our Mergers and Acquisitions page.