As businesses attempt to survive in consolidating industries, many will be approached with the opportunity to acquire another company. Before you even start negotiations, assess whether you have what you need to make the acquisition work.
Planning. When an opportunity is identified, the first step is to design a letter of intent to purchase the company. Then the fun begins. The acquisition integration planning must encompass all products, technology programs, configurations of hardware, training for new and acquired employees, a timeline for integration steps and an assessment of equipment readiness.
How you go about the integration and in what order the operations should merge should be under constant discussion within your organization. All of these activities occur with the moving target of an unknown close date resting on factors such as due diligence, negotiation, agreement drafting, regulatory review and clearance, and, if a public company, shareholder approval.
During the integration process, management of the acquired company should be given an opportunity to learn about the acquiring company and become familiar with the management and integration team. A brief introduction should occur between members of the two management teams to discuss the functions of each department and determine the steps necessary to begin integration.
A presentation by the management of the acquiring company of the intent of the acquisition may prove comforting to everyone involved.
Acquisition integration process. An integration team and project plan should be developed to direct and keep track of the details of the integration. Periodic integration staff meetings should be held to share status updates.
Trips to the acquired company are also recommended, to learn more about its systems and to better understand the business processes and terminology of the company.
If the acquisition is between two distribution companies, get an early start on product file integration. Determine who is responsible for the product file and communicate his or her name to both companies. This initial assignment of duties is a critical element in the success of the integration.
The acquiring company should continually identify processes of the target company that are superior and implement the improvements in its own processes. Never assume that the way you have been doing it is the best way.
Develop a streamlined set of training materials which addresses immediate concerns, but also develop more exhaustive materials for reference purposes. In the training process, you may want an acquired associate to present the procedures of the acquiring company, to help promote a team atmosphere.
If a pilot integration at one location is possible, study that location and the problems and concerns which arise. Then create a detailed instruction list that can be developed and used as the standard format for each subsequent location.
To ease transition, an acquiring company may want to use trail guides — knowledgeable, qualified associates who have experience with the procedures of the acquiring company. Trail guides should be given a list of objectives and use reference materials to help after-hours training, work set-up, order processing assistance and process-flow instruction.
If possible, trail guides should be in place prior to the system integration and stay for a period of time after integration.
Communication. Communication and coordination are critical to the success of the integration effort. Use of internal e-mail or the Internet as a means of communication between the companies may help to satisfy this important requirement.
Maintaining corporate communications throughout the acquisition is vital to keep both customers and stakeholders involved. Design a letter to announce the acquisition and customize it for general customers, customers of the acquiring company, customers of the acquired company, associates, stakeholders of both the acquiring and acquired company and other groups deemed necessary. Communicating quickly and in detail will help you dispel rumors or unnecessary worry within your organization or customer base.
By putting the necessary effort into the transition, you can effectively strengthen your operations, products, morale, corporate image and other areas of your business. Joseph Paul, CPA, is a senior associate at SS&G Financial Services’ Akron office. As part of the company’s auditing team, he specializes in performing due diligence procedures and acquisition advisory services.
