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Integration planning is one of the most important aspects of M&A pre-close. Planning after the fact will cause massive delays and value leaks for the entire deal. It is why the integration team must be involved during the due diligence phase. In this article, we will talk about how to create an executable integration plan during the diligence, featuring Jim Buckley, former Vice President, Mergers and Acquisitions Integration at VMware.
“How corporate development and integration teams are aligned is crucial. They're not the same team, and they have very different goals, although both aim to create value.” - Jim Buckley
Connecting diligence with integration planning
According to Jim, the integration lead must be involved as early in the process as possible. This can be uncomfortable, but it makes a lot of sense to have someone from the integration team listen to those early conversations, even at the preliminary due diligence, or picking the target company.
They are the voice of reason, saying whether something will be hard to integrate, how it could be integrated, and the expected cost in the integration budget. These inputs early on are key to deal success.
Involving the integration team early also eliminates the need for knowledge transfer during post-close. Being involved in employee interaction is highly beneficial for integration planning.
Pre-LOI Integration planning
During pre LOI, acquirers are not given the names of the employees, only the roles. They don't want buyers poaching their key employees. So it is crucial to have the seller describe the roles of the people. In the preliminary plan, integration leads must translate those roles into the parent company with as little friction as possible, and identify risks.
During this phase, the integration lead must also justify and support the valuation in the LOI. At the end of the day, the integration team is the one that has to create the value from the deal. They must validate the valuation drivers that support the strategic rationale that has implied valuation in it.
Building an integration plan
Start from the desired end-state, and work backward. Ensure that the overall strategy is supported by value drivers that are aligned with the integration plan. Start building out what needs to happen each month. Then, involve the functional leads and key contributors, ideally from both sides, and determine key milestones.
There are only two things to get right in M&A integration—customer satisfaction and employee satisfaction.
When you focus on customer satisfaction, you begin to address some of the most important issues like having the right field execs, territory alignment and appropriate commission structure to support this new business.
When you focus on employee satisfaction, if you acquire a company and the employees are not happy, nothing else matters.
Advice for M&A practitioners
In Jim’s long and vast M&A experience, his advice is to be humble and ask questions to navigate through M&A processes effectively. At all levels, even the senior execs down to the most junior person, it should be the same approach. The questions are just different.