Astute Planning, Flawless Execution,
Delighted Customers

Issue #116

Tuesday, August 28, 2007

Building the Integration Team
By Bob Nealon of Nealon Advisory Group

In this article we continue our series on the topic of Growth by Acquisition, providing insights to guide you through your M&A planning and integration efforts. In our last article, we discussed how to set the stage for a successful acquisition. In most cases, acquisitions are completed by senior executives operating within a very restrictive communication network. This is necessary to protect the confidentiality of the negotiations. Once the deal is done, other managers will be asked to take ownership of the integration program. As you proceed toward the closure of the acquisition, it is time to clarify the goals of the integration program and select the integration team.

The range of integration alternatives
Most acquisitions involve some degree of integration ranging from "limited financial and managerial" to "substantial operational." The selection of the appropriate strategy should be based upon the specific acquisition situation. The "limited financial and managerial" approach characterizes the situation in which the newly acquired entity will operate independently as a division or subsidiary. General managers of the independent entity will be accountable to the executives of the parent and most of the conversations will involve strategic direction, financial performance and application of investment capital.

The "substantial operational" approach characterizes integrations in which functional activities of the companies are combined to achieve revenue growth and/or efficiency opportunities, often called "synergies." A growth example would be the addition of acquired products to an established brand family with a significant market acceptance. An efficiency example would include the combining of multiple production activities at a single site to increase capacity utilization.

For the purposes of this article we will assume that the appropriate integration approach is to accomplish "substantial operational" integration in several key department areas. This approach will involve the combination of similar business activities into a new structure of responsibilities and resources. Please refer to the graphic below which depicts this transition. If the program owners have begun to think about an integration team, then decisions regarding the scope and degree of integration have probably already been made.

Communicate the post integration business strategy for everyone
Only after the goals are established and well understood can progress begin. These goals will be translated into the strategies that the integration team will execute. Clarity of these new roles and responsibilities sets the stage for defining the teams and participants. This may take more energy than management is prepared to give to the task, but it is vitally important to the success of the integration effort.

Clear definition of roles
The program leaders must be clear about what the roles on the team will be and who will play what role. Lack of clarity will lead to confusion and frustration among the team members. Decide what groups and which managers will own each major activity at the end of the integration. All else being equal, and subject to the thoughts expressed below, these managers should lead the respective functional teams. In most cases, existing departments "A" and "B" will transition into a new department "C" with similar but expanded responsibilities as compared to either department prior to the transition.

In some rare cases, a new organizational unit will be required to execute some of these new responsibilities. We recommend that the managers responsible for this determination do the following:
 

  • Identify this as soon as possible,
  • Make it known to the rest of the organization; and
  • Fill the resulting leadership positions quickly.

Delays in doing this will delay the program progress because the required decisions cannot be made by others.

For employees working throughout the company, we suggest that working on an acquisition integration program is a valuable career development experience. Not everyone is given the opportunity to participate in this challenging work. Because the work is often different from someone's regular responsibilities and assigned as an additional duty, clear definition of roles and expected outcomes is crucial to success.

With rare exceptions, the management teams who are transferring responsibilities to others can play a participatory role but not a leadership role. This participatory role is extremely valuable to the success of the effort and must be given appropriate respect. After all, the acquirer paid dearly for the contributions of the acquirees' employees.

Simple view of an acquisition integration program

Choosing participants based upon interpersonal skills and openness to change

Acquisition integrations are an extreme version of change management. In the majority of change initiatives, the participants know each other and understand the business context and need for change. In the case of acquisition integrations, most likely someone else decided to combine these entities and the team members have subsequently been assigned to accomplish the tasks. Under these circumstances, choosing people with the right interpersonal skills can be critical to the program's success. Start by choosing people who want to do this work.

People with a curiosity for doing things differently and working with new groups of people will do much better than people who are more comfortable in an established work environment that remains relatively constant. As depicted in the graphic, the participants will lead the way through a transition that results in new ways of doing things and in many cases the ability to do new things. The best way to approach issues may not always be clear at first, and some amount of trial and learning will be required before the path becomes obvious to all. Whenever possible, people who thrive under these circumstances should be selected to lead and participate in integration programs. Generally, the possession of these attitudes is as important a factor for success as any participant's technical skills or business knowledge.

Aligning by skills and functional expertise
At the outset, the new team members may not know each other at all. Pairing people based upon similar experiences and skill sets will provide a sphere of shared experiences to break the ice and generate cooperation. Integration team leaders can amplify this through communication and involvement.

All positions on an integration team must be filled for the program to progress
Although this sounds obvious, an open position cannot contribute much to an integration program. Responsibilities are sometimes assigned to an open position as hiring of new employees is unable to keep up with the progress of the integration program. Senior management must assign the responsibility for specific tasks to someone, even on a temporary basis and give them the authority and resources to accomplish them. Asking a solid person to step into an integration role, even on an acting basis, allows forward movement aligned with the progress of other groups.

And do not forget the program leaders
Within every organization there are employees who thrive in this change oriented environment. We urge management to seek these people out and provide the opportunity for their development. The right program leader with a "can do" attitude and an appreciation for everyone else's contributions can create a very positive team and increase the probability that the goals will be accomplished.

Next steps
Now that the teams have been defined and the leaders selected, you can proceed to establish key assumptions and planning parameters. This will be the topic of our next newsletter in this series.

If you would like to receive more information on this subject without waiting for the full newsletter series, or if you need assistance with an acquisition you are planning or are in the midst of integrating, please contact us. We can help!

 

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+ Growth by Acquisition
 


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