By the time Cisco Systems announced its acquisition of Norwegian videoconferencing company Tandberg last April, company executives had spent the better part of a year traveling to, working in, and thinking very hard about the Oslo-based technology firm it was about to buy for $3 billion.

That work went far beyond the due diligence needed to determine whether to make an offer, and for how much. As Susan McDonough, senior director of acquisition integration for Cisco, explains, her company now addresses many facets of what is typically labeled "postmerger integration" well before the deal actually takes place. That is essential, she says, to foster "the very tight link between business strategy and operational strategy" that will determine the ultimate success of a deal.

For best-practice acquirers such as $40 billion Cisco, postmerger integration now begins at the very earliest stages of negotiations. Even as they begin their integration work much sooner than they once did, these companies are also becoming more flexible about which systems and operations they choose to integrate, and when. They're communicating earlier with stakeholders about their integration plans, even if that means doing it so early that they can say only that more information will be forthcoming soon. And they are conducting rigorous postmortems to identify ways to make subsequent integrations more efficient and effective.

In part, these companies are building on lessons from the past. But the new approach is also a sign of the times.

"Capital is still scarce for many organizations, and during times of scarce capital companies are more diligent about how they raise, invest, optimize, or preserve it," says Jeff Perry, Americas transaction integration practice leader for Ernst & Young. "We have found that the whole focus on integration has been elevated throughout the C-suite in order to drive better results."

That has enormous implications for CFOs and their finance teams, as they now focus not only on identifying the savings that can result from merging redundant operations, but also on benchmarking their own systems and procedures against those of the acquired company and looking for opportunities to apply the best of what each has to offer.

They also are developing metrics to track the integration process itself and its real-time impact on the business so that problems can be spotted and stopped before proving fatal. Put another way, they are increasingly helping to identify and track the synergies that deals offer, and holding the organization accountable for achieving them.

That's a tall order, and while the increased responsibilities are welcome, they come at a price: this new emphasis on early-start integration means that companies will inevitably spend time prepping for deals that never get done.

"It's all part of the investment," says Bryon Rubin, senior vice president of corporate development for $13 billion media conglomerate CBS Corp. "For all the deals we've done — 50 or 60 since our separation from Viacom at the beginning of 2006 — we've walked away from twice as many. But you learn from those, and apply what you've learned to future deals." And, as some experts note, it's cheaper in the long run than the alternative.

"Far worse would be that you end up buying a company and your plans are not ready when the deal closes," says Christopher Kummer, president of the Institute of Mergers, Acquisitions and Alliances in Zurich. He argues that by starting integration planning too late, companies often wind up wrestling with unexpected problems that jeopardize the very business case on which their deals were predicated.

The larger and more complex the organization being acquired, the more likely that will happen. Kummer recalls a recent deal in which the acquirer was disappointed to learn, post closing, that government-mandated severance packages in some European countries made it uneconomical to quickly consolidate locations it had planned to eliminate.

"In almost every large global merger, I find people underestimating the need, urgency, and complexity of the issues at stake, to the point where they underresource their integration effort," confirms John Powers, global merger-and-acquisition consultative services leader for Deloitte.

Besides overlooking intelligence that could affect the economics of a deal, companies that delay integration efforts also forfeit the opportunity to hit the ground running when their deal becomes public. That, too, can lower the odds of success.

"There is sort of a magical time around the announcement of a deal where employees, customers, and partners are very eager and open to hearing how this new combined entity is going to make the world a better place," says Cisco's McDonough. For the past few years, she says, Cisco has sought to capitalize on that "magical time" by being ready from day one to explain how the two companies are going to come together and provide unique value, and how the integration effort itself will be structured to realize that value (see "Ready on Day One" at the end of this article).

"That's key to the success of any integration," says W. Michael Kipphut, CFO and executive vice president of Tampa-based Sykes Enterprises. The $1.2 billion provider of customer contact management services acquired one of its competitors, ICT Group, in early 2010, hiring KPMG to help it accelerate the integration effort.

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