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After The Acquisition, The Importance Of Integration

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Many companies put a lot of work into carefully planning for an acquisition - the financial due diligence, the operational review of the business, the analysis of compatibility with the business plan but often too little attention is paid to the process of making an acquisition work well once the deal is done. This is arguably even more the case in the Recruitment sector than in many others with the thin ranks of management at most companies and the frenetic pace of recruitment activity.

Of course, there are many experienced executives in the Recruitment industry who have undertaken a number of acquisitions highly successfully, however, it is still common to see post integration planning often neglected.

Why do recruitment firms resist putting resources into the development of credible post acquisition integration plans?

This may be for a variety of reasons. Some executives see this as a soft area. Anytime someone starts talking about traditionally soft subjects like integration and culture, the eyes of the financial and operational managers who conceived the deal in the first place often glaze over. But though middle market firms typical in the Recruitment industry will not realise the scale of operational and back-office savings achievable in large corporate deals, they can achieve savings of scale commensurate to the size of the acquisition. On the other hand, if integration is a loose and unplanned they can fail to achieve the strategic advantages that prompted them to make the deal in the first place, wasting the resources devoted to the entire acquisition process. As a result, more operational recruitment managers are beginning to pay serious attention to the so-called soft issues.

Related: The Importance of Business Valuations

Another reason Recruitment firms may do post acquisition integration poorly is because they believe that the scale of their deal is small enough that they can handle it all without much fuss. Some have done smaller deals in the past, and new, larger deals seem like something they can handle. But the complexity of post acquisition integration does not increase in linear fashion, commensurate with the number of new people brought on board - the complexity increases at an increasing rate with the scale of the deal. So many companies fall into a trap - they get off to a bad start for their first significant strategic acquisition because they don't know what they dont know - yet.

Thats why we see some acquisitions falter - not because the underlying strategy that prompted the deal was inherently bad, but because the execution of the integration process was sloppy and inefficient. And when that happens, it can be very hard to undo the damage that comes from a bad start.

What makes integration successful?

Successful post acquisition integrations seem to have a number of facets in common. A review of some of the literature and research on this topic in industry in general indicates that there are some key actions that help to ensure the process flows smoothly and you have the outcome you want.

1. Start Planning Early.

Start the operational planning before the deal is finalised. Its important that there isn't a period where the people in the company acquired don't feel that things are floating and they are unclear on where their efforts should be. This is the time when some of the most talented people in the acquired company will head for greener pastures, reducing the value of the deal, since they are precisely the ones most likely to have other viable employment options.
When management is 80-90 % sure that it will go through is a good time to develop immediate post acquisition plans.

2. Pay careful attention to Leadership Selection.

This is a critical point as putting the wrong person in charge can have a big impact on morale at this time. There are cultures to merge and a need to ensure that systems and processes are migrated effectively. An acquirer may not want the former owner(s) to stay in the business in a leadership capacity and appoint from within the acquired company or from their existing resources. Whichever way you go, its important that the right people provide leadership and have the same agenda that you do.

3. Ask Insiders about Information Flow and Knowledge Networks.

Look beyond the organisation chart to the informal networks that operate within the acquired company. Who has influence and gets things done? Are there feuds or political agendas that act as road blocks? It may not be the formal leaders that will give you these answers as they may be part of the problem or fearful for their own jobs.

4. Develop clear and timely communication strategies

From the first day a deal is announced, good communication with staff of both organisations is essential. One Recruitment company with a record of successful integrations sent a letter home to each employee informing them of the deal and describing some basics of the process through which they would subsequently learn more about the post acquisition integration process. Their message is clear, timely and part of a multi-pronged campaign that will include direct mail, email, meetings, and town hall type orientation sessions - all according to a pre-existing plan and timetable designed to minimise confusion, anxiety and inefficiency throughout the integration process.

5. Dedicate Sufficient Resources to Integration.

This may seem obvious but sometimes a CEO, CFO or COO is given the job of managing the integration without being freed up of their other responsibilities. I dont know of many C-level executives who find time on their hands! An organisational leader with adequate administrative support needs to be given full time responsibility for the transition project. There are a number of case studies on this topic that suggest that the failure to provide adequate staff and budgetary resources to the integration process is one of the most common mistakes companies make following the completion of a deal. The work is not done when the legal and financial due diligence process is complete.

There are other factors that need to be taken into account to ensure effective post acquisition integration but these 5 key points provide valuable planning guidelines.

Examples of this common problem are outlined in ChangeRx: Prescriptions for Successful Change Planning and Implementation - A Practical Guide for Leaders by Dr. A.J Schuler.

Categories: M&A

Tags: Strategy, Acquire, Acquisition and Divestment, HHMC, Recruitment, Staffing, Leadership, Buy and Sell Business, Business Valuation, advisory services

Picture of Richard Hayward

Richard Hayward

Richard has 35 years of experience with outsourcing, recruitment and advisory firms. His record of achievement includes national recruitment management roles, and executive search and selection across the ICT, banking & finance and sales & market sectors. Since 2003 Richard has been a principal of HHMC, guiding recruitment agencies through acquisition and exit assignments. Located in Sydney, Richard works with private and public recruitment agencies globally. HHMC’s innovative business strategies and well-grounded guidance result in clients realising their personal and corporate goals.

P: +61 2 9221 8285 M: +61 411 488 544

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