CFO Offers M&A Advice: People First

Now may be the time for CFOs to consider best practices for ensuring a successful integration of an acquisition, with both Deloitte and Ernst & Young predicting an acceleration of M&A activity in 2018. Both the number of deals and transaction sizes are expected to increase.

Jenny Kray

At a time when digital transformation is changing a lot of business processes, M&A activity provides yet another disruption. However, CFOs can, with the right planning, minimize the interruptions and streamline the transition for all parties.

During my career, I have been involved in nine acquisitions on one side of the deal or the other. Some integrations have been smoother than others, but inevitably, the most successful ones focus on putting people first. Acquisitions are invariably driven by numbers: potential revenue, time to market, eliminating competition, etc. But once a deal closes, success depends on keeping both teams engaged and on the same page. A pre-defined checklist likely won’t yield the best end result.

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If companies don’t take a people-first approach, it often results in an overly aggressive integration playbook, without much or any input from the acquired company, that quickly imposes on the new team a rigid checklist of activities and processes. This can be demoralizing and frustrating for the acquired team and lead to attrition and a range of other roadblocks.

To retain the very magic that made the acquisition appealing in the first place and make the integration as seamless as possible, here are my top five best practices for ensuring success following an acquisition:

1. Listen. It’s important to make the new team members feel highly valued, and nothing will discourage a team more than being told to do things differently without allowing for any input on what made the company successful in the first place. By listening to what had been working prior to the acquisition and looking for ways to fold that into the new organization and your go-forward plan, new employees will feel heard and understood.

2. Identify, acknowledge, and leverage the new expertise that the acquired team brings to the table. Treat the new team members as equals, be open to new ideas, and solicit suggestions for how things can be done better and faster. Even if the ideas can’t all be implemented, at least taking their thoughts into consideration and explaining the reasoning behind a certain approach will help create buy-in of the go forward process with the newly-acquired team.

3. Determine a realistic pace at which the required changes can be rolled out. The speed of business today pushes companies to move extremely fast. This can be detrimental to an organization when an unrealistic timeline is put in place for cutting over processes and systems. Establishing reasonable timelines that balance the expectations of the stakeholders with the needs of the day-to-day teams ensures changes will be well received. This will also ensure that the execution of the integration plan is effective for everyone involved, including existing customers.

4. Work toward a unified vision. If you happen to be on the buy side, don’t assume the acquired employees have any understanding of the rationale for the acquisition and the keys to go-forward success. If you’re on the sell side, don’t assume that the acquirer understands everything about how the business operates on day one of the acquisition. Through one-on-one discussions or group meetings, be sure that both teams understand the mission, the strategy for accomplishing it, the pace of change, and how they fit into the bigger picture. Be proactive with communication, especially if there are objections or confusion, then work together to resolve them.

5. Keep taking the pulse. Over the integration period, don’t measure success merely by whether objectives are being met. It’s important to also look at the intangibles: Is the mission clear? Are communications regular and productive? Are problems being voiced and resolved? Frequent check-ins within the integration teams and across the company allow concerns to be addressed quickly. Don’t be afraid to adjust expectations and timing, if needed, and make sure teams are focused on the right priorities.

Every business is challenged to ensure that employees work effectively and enthusiastically toward the same goal. That challenge can certainly be more difficult following an acquisition.

However, by listening to the new team, consistently and proactively communicating, and modifying the acquisition playbook to reflect the strengths of the acquired company, the integration will inevitably be more successful — allowing everyone to achieve the financial or strategic goals that inspired the acquisition much more quickly.

Jenny Kray is CFO of Calabrio, a provider of work-optimization software. She’s also been vice president of finance at SPS Commerce and CFO of Network Instrument.