We recently hosted the latest in our series of selling your business webinars which looked at best practice integration from both a buyer and seller perspective. The session explored the steps acquirers take from an integration perspective to ensure that acquisitions will be a success before, during and after a transaction, while also discussing what sellers can do and what they should be finding out from potential acquirers to help ensure successful integration.
We spoke to Kathryn Herrick, Interim Deputy CFO of Next 15 and general Board Advisor, and Tim Bonnet, President of Unlimited Group, who offered practical insights based on what they have seen work well, and also not quite so well, from their wealth of transaction experience. Watch the webinar now or read on for our summary of the five most important considerations for ensuring successful integration for all parties involved in a transaction.
“Make sure both parties are aligned on why they’re doing this and the reasons for why they want each other as partner. See if you can mutually agree a press release at the start of the process.”
Tim Bonnet, President of Unlimited Group
“Integration is really fun – you need a lot of energy, a lot of passion. But it’s the fun part of the process in my reading because you’ve done all the hard work and negotiated the deal. Integration is the chance to meet people, get to know the company and vice versa, so it should be fun and you should celebrate the milestones.”
Kathryn Herrick, Interim Deputy CFO of Next 15 and general Board Advisor
“Make sure the chemistry’s right and you get on because if you don’t it’s going to be a very hard road. Make sure you both set aside the time to work through the real nitty-gritty detail of an earn-out if there is one, because nothing’s going to throw things off than people not understanding what deal they’ve signed up to or not dealing with those issues in advance. Put that effort in upfront.”
Dan Leaman, Corporate Finance Partner, Moore Kingston Smith
Top five tips for best practice integration
- Align your objectives
Both parties involved in the transaction need to be clear on what they want to achieve and ensure, before anything else, that their objectives match up. As a buyer, are you looking to quickly expand your client base or is your focus on adding new skillsets and disciplines to your current proposition? As a seller, does the transaction enable you to achieve your growth aspirations while also strengthening the buyer’s existing offering?
- Think about it from the start
It’s all about planning upfront. A mutually agreed integration plan should be set out early on in the process, before anyone signs anything. This should clearly outline considerations such as timetables, roles and responsibilities, principles, costs, cross-charges, investments, tasks and activities. Doing this will ensure all parties are on the same page from the beginning of the transaction and expectations are realistic and well-managed.
- Ensure cultural fit and communication
Chemistry is vital. There is a lot of work to be done by the management teams on both sides of the transaction in order to build up a high level of trust and get people truly invested in delivering a shared vision both before and after the transaction. Both parties should set aside time to ensure the cultural fit is strong, and also to collaboratively deal with the nitty-gritty and iron out any issues as they arise before they become a barrier to growth. Ensure the balance is right and that control is shared.
- Be transparent and do your due diligence
Due diligence should be done both ways. Often, focus is on the due diligence process carried out by buyers on potential targets. Their goal is to understand what they are taking on and what they will gain, so sellers should present this information clearly in their sale documentation. However, sellers should also invest time in fully scoping out their potential acquirer, ensuring they know what they are getting into and asking the right questions to identify whether they are a good strategic fit.
- Make sure both parties are committed to maximising the earn-out
It is important to think about the structuring of the earn-out, what can impact it and how it should be maximised for both acquirer and seller. All potential costs and charges, including exceptional items like restructuring and investments, should be listed out and discussed early on. Earn-outs can hinder growth and integration if too much time and energy is spent on constantly worrying about resource sharing, the delegation of costs and where profit is going to go. Enlist good advisers who can help you navigate these conversations and advise on how best to structure your earn-out agreements for the benefit of both parties, aligning behaviours as effectively as possible. It is not uncommon for earn-outs to be re-negotiated depending on the performance of either party, and so you will want expert advice on hand to help you avoid fractious conversations becoming detrimental to the business’ success.
Check out some other useful insights:
Webinar recording: selling your business for you, your team and your new investor
Webinar recording: selling your business – should you consider private equity?
Top tips for a successful sale process
Talk to us
If you are thinking of buying or selling, talk to our team of corporate finance advisers today.