Circle Back — and Move Ahead
Editor’s note: this post is the final installment in a series on the six steps towards successful mergers and acquisitions.
Congratulations — having carefully planned and executed the acquisition of a printing company to complement the one you already own, you’re finally prepared to sit down with the seller to close the deal. Naturally, you’re feeling good about what you’ve accomplished and what the future holds for the merged entity that your effort has created.
This is the point at which we always urge our buying clients to pause, take a breath, and circle back to the essentials of the transaction. This step clears away any remaining ambiguities and puts the buyer in the right frame of mind for what comes next: making the acquisition work not just on paper but in actual practice.
Your due diligence was thorough, so there should be no major gaps in your knowledge of what you are buying. But, because the acquisition process has taken time, it’s prudent at this late stage to review the underlying economics of the deal and verify that they are the same now as they were when the process began.
For example: are the assets actually there? Can accounts receivable be collected, or must some of them be written off? Is inventory usable, or has it lost value? What about seemingly minor details such as finding out whether there are valid licenses for all of the software the seller uses? Little oversights can return as big annoyances if they’re not exposed while there’s still time do something about them.
Circle back to the risks of the acquisition to reconfirm your understanding of what they are and how to deal with them. Again, thanks to due diligence, there should be no surprises. But, take another look at issues such as customer retention and the continued participation of key employees. Would worst-case scenarios be manageable, and if so, how?
With your questions answered satisfactorily, you can proceed to signing. Now, the hard work begins.
Integrating an acquisition is complicated. It needs a transition roadmap that prescribes steps for action and milestones for measurement, the same as a strategic business plan. The people carrying it out should be under the direction of a dedicated transition leader who reports to the buying CEO.
One of the most important elements of a successful integration is communication. This is why the plan should be specific about who will be notified of the acquisition, how, and when. Confidentiality should be maintained while the announcement is rolled out in stages. Customers come first, followed by employees, suppliers, and other constituents.
Let’s say it again: customers come first in this and every other aspect of the integration. That’s the first tenet of decision-making for buyers. The second tenet is to manage the integration in a way that achieves the desired economics of the deal — but only after prioritizing the interests of customers. If a choice has to be made about a trade-off between the two, always default to the customer.
Now you can bring the acquisition full circle, stand back, and admire the result — until, with the guidance of a qualified M&A advisor, you are ready to make your next one.