DILEMMA: I am expanding my business by acquiring a small competitor. How do I successfully integrate the two businesses?
ISSUES: Too often, when a successful medium-sized business is taking over a competitor, its owner/manager puts all his or her effort into negotiating the deal and obtaining funding. They only think about how the two businesses will be integrated once the acquisition is virtually complete. By then, it is too late and many acquisitions end up having a disastrous first few weeks from which they never really recover.
Acquisitions involve a major logistical and emotional exercise. It is therefore vital to decide what needs integrating early on. If the acquired company is a direct competitor, that could mean everything - its people, marketing operations, suppliers, IT systems, financial systems, pricing, salaries and so on.
The acquiring company should ask itself some key questions: Is there the management capacity within both companies to manage the transition or will temporary external help be needed?
How can the momentum of both businesses be maximised during the integration process?
How can the acquiring business ensure its team has the right attitude to integrating the two businesses?
- Plan ahead and, as soon as negotiations start, nominate someone to manage integration - but not the managing director. The MD should be in charge of keeping open communication channels.
- Make sure you have enough management capacity.
- Remember why you are buying the business and communicate your reasons to both teams, to give them a sense of purpose.
- Prioritise. Focus on the things that will deliver most benefit.
Explain your plan and priorities to all concerned. Give them confidence and make them feel that everything is under control.
- Establish financial control from day one.
- Avoid the 'conquering hero' syndrome. You may be able to learn a lot from the acquired company's ways of doing things. Make sure you have people from both companies running the integration project teams, and promote employees from the acquired company as soon as you can.
- Think hard about communications. If there are to be job cuts, remember to think as much about employees who are staying as about those going. Good quality people may leave if you don't.
Patrick Dunne works with 3i.