The deal is done and the signatures are dry. You’ve identified the target acquisition, completed due diligence, and finalized the purchase agreement. You’ve spent an inordinate amount of time and effort to successfully get both sides to the table. Now, there may be a natural tendency to pause, exhale and celebrate.
While private equity deals can be an exhaustive process, the post-merger integration phase is just as important. Mismanagement during this phase is one of the most common reasons mergers or acquisitions fail. Be sure to understand how to navigate the post-merger integration for long-term success.
Overcome a Lack of Preparation
Frequently, new owners are ill-prepared ahead of a business transition. It’s possible the previous owner left unreliable operational and financial infrastructures in place, which could bring additional challenges. Even if infrastructure is adequate, the previous owner may no longer be around to answer questions. Lack of clarity on infrastructure, combined with a gap in legacy knowledge, can also impact your recently acquired organization.
Ideally, these pain points are identified during due diligence. If not, you must address these hurdles after the transition is complete. Every acquisition is different and there is no one-size-fits-all approach for a successful postmerger transition. Be sure to seek experienced guidance during the process. You can also leverage the same people in both the due diligence and post-acquisition phases since they have seen the organization’s shortcomings firsthand and can help identify ways to move forward.
Identify Transitional Needs
Post-merger integration often brings several new projects, each with its own needs and timelines. For example, you may find a need to outsource the payroll and benefits mechanisms or hire a new bookkeeper. Realize that it may be a long and arduous process to work out costs, identify enterprise resource planning software, and accommodate staffing.
These hard-to-calculate needs can make the transition challenging. However, once you identify them, you can determine realistic solutions. Although you could hire staff and handle any challenges internally, doing so could be expensive in the long run.
Plenty of individuals or organizations can offer guidance and consulting, but you should first determine whether these solutions are right for you. Consider assistance from a third party who wants to see the organization succeed in your vision—not someone who wants to integrate their products or services. That assistance should come from a partner who can help navigate the heavy lifting of the transition and then step aside to leave you confidently in control. Look for someone with experience dealing in the small-to-midsize market, and with a track record of working with founder-owned company transitions.
The right partner can help successfully navigate the post-merger integration. Once that process is complete, it’s finally time to celebrate.
Jeff Servais has over 15 years of public accounting experience and is a principal in charge of the Transaction Services practice for CLA (CliftonLarsonAllen LLP), where he works with a variety of clients from development stage to private multinational companies. CLA has extensive experience with small to midmarket mergers and can help ease the pain of a post-merger integration with its customized approach.