5 Quick Tips on How to Combat Common Integration Troubles
Director of Marketing at DealRoom
Common M&A Integration Problems and How tp Prevent Them
By the time many deals get to the integration phase, team burnout and fatigue, along with all of the moving pieces of two companies coming together, can create some murky, complicated waters. Further complicating matters are things such as company culture and organization, deal frequency, the type of deal taking place (domestic vs. global), and the age of the company affecting integration.
For industry experts, it comes as no surprise that integration is often a more challenging task than diligence; being cognizant of why it is more challenging is key to improving integration practices.
Here are 4 common integration problems facing M&A practitioners:
1. Managing different work streams
The number of workstreams can double after an acquisition. Determining how to best organize and manage these workstreams, as well as determining which key players from both the buy-side and the sell-side should be a part of each workstream, is challenging to say the least. Some steps that can be taken to address this problem are to have a change management expert on board who can interview and really get to know the target company employees before integration begins. This will lead to less resistance and clearer expectations when day 1 arrives. (You can read more about the power of change management in our blog with expert Dawn White.)
Additionally, hosting a proper kick-off meeting at the commencement of the deal, where leaders from each workstream should be identified, can help. However, perhaps the ultimate approach that can be taken to address this challenge is adopting and teaching an Agile mindset. A paramount element of Agile is accountability, and in order to be accountable, team members need to know and understand their roles; in addition, one team member should be the manager who is responsible for setting the team’s priorities, which should center around the key goals of the integration. With each workstream building its list of tasks around the established essential goals, the sum total of all work will be moving in the same direction with the same vision.
2. Visibility across teams
Workstreams need to be in communication with each other. This can be done via stand-up style meetings where a manager from each workstream participates in a short meeting and reports to the other streams and upper level management what his/her team has been working on and what, if any, information is needed from another team. Post merger integration tools can also help create visibility.
3. Duplicate work
Failure to have visibility across teams very often results in duplicate work. Duplicate work wastes time, money and resources, hindering successful integration. Teams that duplicate work are inherently inefficient, and, therefore, the expected value of the deal will not be realized.
4. Use different tools and different styles of management
Lack of a central hub for sharing information and/or relying on separate management tools also impedes integration. Integration is the marriage of two companies - this means similar management styles must be cultivated and the same tools must be used. When these things are done, visibility across streams increases, the amount of duplicate work decreases and the full potential of the deal can be realized.
The difficulties of post merger integration can be addressed through the adoption of a more Agile workflow and expert insights, both of which can be assisted by tools designed for M&A with a focus on integration planning, such as DealRoom. This phase of mergers and acquisitions cannot be over simplified; therefore, the above is meant to raise awareness in teams and to spark a journey toward efficiency and new best practices. More specific information regarding integration and Agile can be found at DealRoom.net.
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.
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!
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.
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.