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3 Ways to Fortify Your M&A Integration Practices

3 Ways to Strength Your M&A Integration Processes

The value placed around integration must come from the top down. We already know the major reasons deals fail is due to poor integration planning and execution; therefore, in addition to developing proven, standardized templates and processes, companies must hold integration practitioners and practices in the highest regard.

The following are three critical counsels from industry practitioners that move beyond the basic tips for integration planning and execution.

1. Establish continuity by having diligence team members become integration team members

Best practices prove that the people doing diligence should become part of the integration team in order to retain and revise information without redoing work or engaging in redundant tasks. When using the same individuals for diligence and integration, there is continuity which is invaluable during the often chaotic time of deal closing and integration. The benefits of this continuity are numerous.

Consider for instance the time it would take for the diligence team members to do a full data transfer to the integration team. Would every bit of information really get transferred? What about the overlooked notes on notepads that do not get passed on? Obviously, even the best intended data hand-offs would end in some gaps and oversights. In addition, let’s say that in the best case scenario all of the information from the diligence team does get to the integration team - will the members of integration really go over all of this work? Most likely not because they will be under the gun and strapped for time, which, again, will result in gaps of knowledge and oversights.

Consequently, the best, and the most efficient, way of integrating is to have overlap between the diligence team and the integration team. This model also increases the likelihood that the team will maintain its momentum and capture the synergies, or “low hanging fruit”, of the deal that are found within the first 120 days.

2. Eliminate workload friction by having honest conversations and settings a detailed integration budget

While having a separate integration team is not possible for all companies, there are some things smaller corporations can do to make sure the key integration players have a balanced and manageable workload. In order for integration tasks to receive the attention they need, honest conversations between workers and Corp-Dev need to be had.

What can actually be accomplished? Are there other day-to-day tasks or projects that can be handed off to other employees while certain people work on integration? In some cases, companies might consider hiring temporary workers and building  this into the integration budget. The integration budget needs to be looked at very closely and with realistic eyes.

3. Have your integration plan in place (and more than just your standard templates) before the deal closes

M&A Integration planning must begin at the beginning of the deal, and practices, integral team members, and plans must be established before the deal closes. More specifically, there should be 30, 60, and 90 day plans put into place. Additionally, a list of people for integration should be generated.

When selecting an integration leader, recommendations should come from members of the diligence team and all candidates should be interviewed by the CEO - remember,  strong integration practices and the valuing of integration comes from the top-down.

Closing thoughts on how to fortify your integration practices

Standardized practices, honest communication, and overlap between the diligence and integration teams will help establish continuity, which is invaluable in the realm of M&A. The results of robust integration practices are numerous: capturing synergies, maximizing deal value, maintaining momentum, and limiting employee burn-out; given these key components of successful deals, integration planning should be on the minds of all acquiring companies.

m&a integration practices
Useful Links

3 Ways to Accelerate Integration

Forbes Post Merger Integration Article

Integration Software for Post Merger

What Causes Deal Fever? What Raises the Risk?

There are several symptoms that can lead to the disease of deal fever. 

One such symptom of deal fever is getting carried away in the heat of the deal. There is a lot of time and effort spent just exploring a potential deal, let along the negotiations involved. Sometimes people spend so much time and effort on exploring and negotiating the deal that they feel is must get done at all costs, while failing to take a birds-eye view in determining if the deal is really the best thing for the company.

Another symptom indicating the presence of deal fever and one that raises the risk of catching it is when certain executives become more excited about the deal and emotionally involved in the outcome than other members of the group. This can lead to inflating the deal’s potential strengths instead of also focusing on potential pitfalls. In a competitive situation, sometimes certain people want to do the deal much more than others for a variety of reasons. 

Many M&A teams also use M&A software to help them source new deals. Just because a software is telling you a deal is a good idea, that doesn't mean you don't have to do the proper research.

How to Prevent Deal Fever

Great news! There are a number of proven ways to prevent deal fever and keep your company disease-free. Here are some tips to stay deal fever-free:

  • Perform More Research Than You Need To. You can never perform too much research on a potential deal, so we recommend doing even more than you think you need to.  
  • Seek The Opinion Of Experienced Deal Makers. Get another opinion from someone you trust that has embarked on similar deals. What do they think of the deal? Seeking another opinion that can evaluate your potential deal without the emotional involvement will help you ensure the deal is truly one you want to pursue!
  • Know All Of The Potential Risks. Thoroughly evaluating the deal’s potential risks, and involving your team in the process, will help you avoid deal fever. Don’t lose sight of your basic financial calculations! Involving others in the process is essential, as you want to make sure nothing is overlooked and you can remain deal fever-free. 

Resist deal fever by not overlooking the negatives that you may not want to see! If you have been the primary person working on the deal, make sure you involve others so they can help assure that you are seeing everything clearly. There should never be one person working on deal flow tracking. Likewise, don’t let personal pressures to get the deal done get in the way of looking at everything objectively. Sometimes, not doing the deal may be in the best interests of the company.

How to Tell When You Have Deal Fever

Do you have a high degree of risk tolerance? Do you have a burning desire to get the deal done, yet something just doesn’t feel right about it but you’re not sure what? If so, you may be catching a slight bout of deal fever.

Having the above feelings isn’t just exclusive to individuals, either. Many companies surveyed believe that their M&A function of getting the deal done is more important than what follows. If you’re in the M&A department, and you’re not performing M&A’s, something must be wrong, right? No, not necessarily. Inherently good deals are difficult to come by and you may have to pass on many of them before you find the right fit.

If deals contain personal agendas or emotions, or your company provides more incentives and encouragement to do the deals rather than not, than these are signs that your company may have deal fever. Recognize the signs so you can avoid deal fever and ensure you are making deals that have the highest chances of future success for your company.

Deal Fever

Treatment, Care & Medications For Deal Fever

Below are some treatment, care and medications for this contagious disease known as deal fever:

  • Treatment Option 1. Ensure your deal team is incentivized for long term success, and not just for completion of the deal.
  • Treatment Option 2. Have objective, experienced observers review the deal specs, including all of the potential negatives of doing the deal.  This way you can help ensure you’re not overlooking potential pitfalls.
  • Treatment Option 3. Let post-close executives have direct input into whether or not the deal goes through
  • Medications For Deal Fever. Create clear action steps that are to be taken when considering all potential deals. Create a set of red flags, or things to be looked at more closely when they occur. Finally, a healthy dose of objective observation by people not directly involved in the process will both help prevent and cure this debilitating disease!

A very important aspect in our guide on deal fever is to cultivate a business culture in which you have both risk tolerant and risk averse individuals on the team, with both groups having equal say. When both groups sign off on a potential deal, and it is also reviewed by an objective observer, you know you might have a winner!

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Don’t Underestimate the Power of Diet, Exercise & Rest

One of the most important ways to prevent deal fever that is often overlooked is to ensure you have a good diet, and are getting enough exercise and rest. Doing so will keep your mind and body in tip top shape, and will help alleviate some of the pressures incurred from pursuing and evaluating a potential deal. 

M&A deals are complex transactions that often go at a very fast pace and can also be emotionally charged, so ensuring you’re eating well, exercising and getting enough rest can help counteract the pressures of working on the deal.

The Takeaway

Many M&A management can sometimes lack a truly accountable leader to oversee the process. Having a great leader, coupled with the goal of long term success instead of short term, are the highlights of the best things to do to not get infected with this crippling disease. Set the criteria for success and focus on that more than focusing on doing the deal just to get it over with. Make sure your team is incentivized on long term goals and are not acting out of the fear of “what if we don’t get this deal done.”

If you and your team are currently managing M&A transactions, check out DealRoom's M&A virtual data room and project management software. DealRoom's platform also includes pipeline and integration management, which helps teams organize deals for their entire lifecycle.

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