How to integrate an acquired company without hindering your own organisation
30 Jan 2012 16:35
Fash Darabi is one of the founding directors of Knowledge Peers and is a director of F2D Ltd. Prior to that he was an executive director of Ovum plc. He has held a wide range of responsibilities including: development of new services, acquisitions, management of Ovum's research business and management of sales and marketing functions.The Challenge
The company that I used to work for acquired a small US competitor with 35 staff. The acquired business was loss making but had a good reputation with customers and offered products that complemented our own. The logic behind this acquisition was that we could strip out more than half of its costs whilst maintaining its revenues, thus rapidly turning a business which was loss making as a standalone into a margin enhancing component of our own business.
We needed to implement the planned cost savings upfront whilst not damaging customer relationships, product sales or staff morale. Speed of implementation was of essence because we could not afford to run the two organisations side by side and did not want to go down the slippery slope of a gradual integration process.
The Approach Taken
I was appointed by my board to manage the integration process. I was an executive member of the board myself, knew our business inside out and had authority and respect across our various departments – in other words I could get things done across the business without too much cross-functional discussion or infighting. Critically, I had the approval and trust of our chief executive as well as the rest of the board which allowed me to move forward decisively and speedily without having to refer constantly back.
We started planning for the integration phase as soon as we had agreed the “heads” with the vendors, a couple of month prior to completion. I had not realised it at the time, but the trusting relationship that I managed to develop with the operations head of the acquired business really helped me understand the business that we were acquiring, its people, its strengths and risks. Together we worked out the details of who and what we should keep, which customers to target with what products, how to position and sell the acquired products alongside our own products and what to be sensitive to in order to keep on-side the key staff.
Prior to completion I set up a cross-functional team consisting of the heads of HR, sales, marketing, finance and product/services, each responsible for implementing the integration plan in their area. Without the collective commitment and flexibility of this team we would not have been able to overcome many of the unforeseen barriers that we came across as integration progressed.
Shortly before completion, the owners of the acquired company arranged for all their staff to attend a meeting in San Francisco. At this meeting they announced their intention to sell the company. I then talked to them about who we were, our culture, our ambitions and what role we saw for them within the enlarged organisation.
Over the following 3 days I met their staff individually, listened to their views and talked to them about our intentions and possible implications for them individually. By the end of these meetings I had finalised my staff plans and costs. We agreed with the vendors that we would only buy the assets of the company rather than the business as a going entity which meant that the existing owners had to handle all the lay-offs. This allowed us to start on a completely positive note on the first day after completion as all the redundancies and negative news was behind us.
Back in London I briefed our own staff about the acquisition, the people that would join our company, the value that they would bring and how we should present this to the outside world. I made it clear that the people who were joining us were brilliant in their jobs and made it clear that we would not tolerate any sense of ‘us and them’ or expressions of superiority as us being the ‘conquerors’. It is worth mentioning that I remained sensitive to this point for many months after completion until I was sure that the new staff felt at home. I believe that many of them pushed beyond our expectations to deliver results in order to prove that the acquisition had been a good idea.
Separately, I briefed our global sales teams in detail about the products of the acquired company and how they should position these alongside our own products.
We had prepared announcements for the press and for the customers of both companies which we triggered as soon as the deal was signed. One of the crucial first tasks after the announcement was to for me to contact some of our key account customers (both existing and new) to talk them through the acquisition and the benefits that this would bring for them.
The integration phase took about 4 months. Many detailed aspects of the plan was managed by the cross-functional integration team that I had set up. We met twice a week and went through the action plan that we had set up until the very last box was ticked. Interestingly, going through this process we had come closer together as individuals which helped us in the management of the company and other acquisitions further down the line.
Key Learning Points
- Put someone in charge of integration who has authority, peoples' skills and energy. Do not leave it in the hands of individual department heads to somehow pull it through during their spare time.
- Meet the staff of the acquired company as soon as the acquisition discussions are out in the open. Be positive but frank. Bring them onside and give them a sense that their ‘new family is OK’.
- Draw up your detailed integration plans in advance of completion. Make sure that the functional heads in your organisation are on your side and share the integration plan with you. Implement your plan quickly and decisively. Remove agreed cost savings upfront and immediately.
- Key to success is attention to detail and sensitivity to peoples’ worries and fears. Make sure that you have a competent HR professional working with you. He/she must have experience in handling of redundancies and Tupe regulations.• Key to success is attention to detail and sensitivity to peoples’ worries and fears. Make sure that you have a competent HR professional working with you. He/she must have experience in handling of redundancies and Tupe regulations.
- Act as the ‘foster parent’ for the staff of the acquired company. Give them the challenge of making the integration work for you. Celebrate successes.