20 Jan Saving Your Acquisition Victory from the Jaws of Defeat
When buying for growth, to best capture the value that drove the deal and to optimize having your M&A transaction succeed, you, the buyer, must clearly understand and decisively act upon the following:
IT IS IMPERATIVE THAT YOU ENGAGE IN EARLY PRE-CLOSING PREPARATION FOR AN IMMEDIATE AND ACCELERATED POST-M&A TRANSACTION TRANSITION FOR YOU TO BEST CAPTURE THE VALUE OF YOUR M&A TRANSACTION AND NOT DELAY YOUR POST-TRANSITION OPERATIONS.
There is no value in a prolonged transition following the closing of your M&A transaction. Generally, buyers that succeed are those that learn quicker, act faster, and adapt sooner. They make and execute early informed decisions regarding value creation and the focused allocation of resources. Their decisions are linked to sustained value creation.
The Danger of a Prolonged Transition.
While any company’s implementation of a change in behavior or culture can be expensive, delaying and prolonging buyer transition change following the closing of an M&A transaction can be catastrophic. A prolonged transition reduces or postpones the payback from the M&A transaction, and in doing so adds to cost, slows growth, destroys profit and decreases cash flow.
- The longer you delay reducing a pre-planned reduction in headcount, the higher the cost for you
- The longer the transition period, the longer it will take you to get a return on your acquisition investment
- Lack of clear communication regarding transition matters results in rumors, internal resentment and labor discord
Every which way, a prolonged transition increases your expenses not just in theory but in practice.
Generally, on the first day following the closing of your acquisition you should set up and have the following meetings in the following order:
- An initial “get together” meeting with your senior managers (which may or may not be a broader group than your transition team).
- An all-employee meeting; and
- A more formal business meeting with your senior managers.
Your all-employee meeting should give you a sense of the mood of your employees. Getting a sense of the mood of your employees based on their questions and body language before your subsequent more formal meeting with your senior managers will be valuable since you can discuss your impressions and concerns at that subsequent meeting. Then a plan can be discussed to promptly address those concerns. Your success is closely tied to the morale of your employees.
In addition to these first day meetings, during the first week, you will probably want to hold additional meetings to move forward in implementing the transition as quickly as possible.
Managing Communication During the Transition.
Following the closing of your acquisition, questions will arise in real-time from your customers and clients, suppliers, and others about its “meaning” (i.e., each questioner wants to know how it will affect them). They want to know what will change and how any change will impact them. In reply, most company leaders and senior managers are generally unprepared and consequently shoot from the hip. The results of these fuzzy half-answers are typically greater uncertainty, confusion, anxiety, and cost.
The goal of effective communication during a transition is obtaining stakeholder understanding and acceptance. You want to build support for your new post-acquisition business and minimize the negative effects of uncertainty (which harms performance).
Value Driver Analysis.
Generally, capturing economic value in transitions is a function of speed. Speed truly makes a big difference. If you do not implement quickly, your opportunities will disappear before you can extract the rewards you expect from your M&A transaction. Your first 100 days post-closing is the outer limit of employee enthusiasm, customer or client tolerance, and investor patience.
When to get in touch with us.
Contacting us early in the process will enable us to consider the legal hurdles and costs of your acquisition. In addition to the likely legal costs, we will help you analyze the results of your diligence so that you will have taken costs like parachute payments, potential or actual legal, tax or pension liabilities and paths to tax savings into account.
Post-acquisition accelerated transition as discussed in this blog is not a growth strategy per se, but a means to implement a growth strategy. Those who learn faster, act quicker and adapt sooner reap the reward first, leaving what is left to the rest.