Acquisition Integration Project Management & Planning

Recently, a Project Manager in St. Louis asked me about due diligence and acquisition integration. They were coming into the acquisition process with no previous experience. First, we addressed the due diligence process, but the other piece of the acquisition comes during the integration. Integration project management and planning is vital during this step.

Informing the Project Manager that the company is targeting an acquisition puts the manager in a positive place; this means there is time to prepare for the integration. Keep in mind, while targeting and completing the transaction aren’t the same, if the CEO is actively seeking acquisitions, it’s likely a transaction and integration will happen eventually. So once you get the heads up, you should start considering the integration plan.

Integration project planning has to cross multiple levels of the company to be successful
Image via Burst

Smooth integration requires much integration project planning and the implementation of the plan needs to cross organization lines. To ensure this happens, careful integration project management is required. Once acquired, the plan of the target needs to include input of members from each business by including them on the integration project management team as you refine the integration plan. If your CEO clearly defined the “why” and the “what” of the acquisition, your definition of the “how” will be much easier.

The performance of an acquired business often doesn’t meet the projected value, even in large companies with dedicated integration project management teams. For small companies, successful integration is in some ways easier, although still a huge amount of work. The lead integrators in a small company, usually the CEO and finance, are closely familiar with the business, culture, and employees, which isn’t necessarily the case in a larger organization. Integrating the new business is a more intimate affair in a smaller company and therefore, I believe, the likelihood of success can be greater.

Keep in mind that there are tangible and intangible drivers for implementing a successful integration management plan. Both are critical to success and often only the tangible is addressed in the acquisition integration management and strategic plan. The tangible factors are easier to identify, quantify, and develop tactics for integration. Recognizing the intangible factors is also important and the CEO sets the stage for the cultural integration beginning in the evaluation and negotiation process. Once the deal is done, in creating “day one”. It is likely that you will be responsible for the mechanics of making that happen.

Integration Project Management: Planning for Day One

For day one to go as smoothly as possible, it’s important that the integration project management team works together. If you’re overseeing the process you should be sure to do the following:

  • Coordinate with your CEO on the messaging of the day to make sure it is threaded throughout the areas of your responsibility.
  • Anticipate and coordinate the communications for customers, vendors, and other stakeholders. You may be responsible for drafting these as well, unless you are part of a larger organization.
  • Anticipate and coordinate the press release and social media platforms. An outside marketing & PR firm or internal staff may do the actual drafting and release. Be sure the social media team has announcement content with consistent messaging.
  • Prepare for the formal onboarding of new team members. Coordinate with all team members for appropriate introductions and conveying consistent messaging.

General Planning for a Smooth Integration

Initial planning for the tangible elements of acquisition involves thinking about all the elements of your business that are everyday occurrences. Much of the integration process is adjusting the mechanics of the combined entity. Again, clearly defining the “why” of the acquisition will help guide the integration project management team with the general planning for the impact on the acquiring company.

Creating an integration project plan from day 1 will ensure a much smoother transition
Image via Pxhere

It is important to remember that the acquisition is supposed to benefit the whole new company. Spend enough time with the acquisition to identify their best practices that you should adopt. Do NOT shoehorn the acquisition into your company’s mold. Both sides have strengths to bring to the table. The more you optimize the culture, learning curve, and operations, the more successful and smooth the acquisition process will be for all employees.

Your integration project management plan needs to start by asking questions on the changes in the business. Based on the answers, the team will then develop the steps to address each issue. Hopefully, the cost side of these questions was modeled in the forecasts you prepared for the negotiations.

Some areas to examine as part of your integration project management plan:

    • CashWill customers change their deposit habits, directing to your lockbox or location? How will you communicate any change and in what timeframe? Will deposit activity change substantially (large individual deposits periodically or a significant volume of small transactions)? What about credit cards and ACH draws from customers or by vendors? Will vendor payments change to your bank or not? What does your bank need to know about any of these changes? Does this offer an opportunity to restructure bank fees? Does your current bank have the capacity to handle the potential changes or do you need a new relationship?
      Develop a timeline, specific steps, and responsibilities to address the answers.
    • Accounts Receivable – Are the payment terms similar to the current terms? Do the customers pay in the same way (ACH, direct deposit, lockbox, credit card)? Are expected customer balances higher or lower than your current business? How do the expected balances support any line of credit requirements? (Keep in mind an acquisition often includes either new banking needs or renegotiation of current requirements.) What are the implications of changes in distribution channels (adding online, a distributor network, retail locations or other)?
      Develop a timeline, specific steps, and responsibilities to address the answers. Notify customers of any changes in invoicing and deposit procedures, addresses or other changes. Address the transition as part of any long-term contracts as negotiated.
    • Inventory Do you have a comprehensive inventory procedure to employ to assure complete and accurate inventory. Will SKUs increase because of the acquisition? Will there be a consolidation of physical space deciding where, when, and how? How will inventory changes influence related costs (rent, shipping, employees, etc.)?
      Develop a timeline, outline specific steps and allocate responsibilities to address the answers.
    • Accounts PayableCan you consolidate purchasing power? How and when will you consolidate? Do vendor balances and expected payments vary from your business (large periodic payments or small regular payments)? How does that affect cash flow and bank balances?
      Develop a timeline, outline specific steps, and allocate responsibilities to address the answers. Notify vendors of any changes in billing and shipping addresses or other information. Address any long-term contracts as negotiated.
    • Debt – Typically, this changes with the acquisition. Do you have new covenants and reporting requirements?
      Develop a timeline, specific steps, and responsibilities to develop systems to assure compliance.
    • Negotiated Compliance – In the case of our acquisition, we had a lookback provision based on the actual revenue from customers in existence at the time of the acquisition. This required specific reporting for a class of customers. Does the agreement call for any specific reporting to the seller (often required with seller financing) or others involved in the transaction?
      Develop a timeline, specific steps, and responsibilities to develop systems to assure compliance.
    • Other changes – This is the laundry list of things that change because of any location, name, or other changes and often this simply means changing who pays the bill.
      • Update licenses (software, naming rights, etc.), leases, contracts, etc. according to negotiated or legal requirements.
      • Determine the use and integration of phone systems, ERP, CRM, or other systems and the transition plan. Obviously, a single line here understates what is involved. The initial evaluation establishes a timeline for decision and change, keeping in mind the 90-day window. Often an acquisition forces an upgrade in the systems due to volume and or changes in complexity. In the meantime, what actions are required to keep things running?
      • Change of physical space – Often there are long-term lease commitments to deal with. For example, in an acquisition that we did, we were responsible for some high rent space that no longer suited our needs. We moved to a new location (another set of to do’s) and sublet the space. While the sublet payments didn’t cover the entire cost, it did defray the out of pocket expenses. Consider areas you’re integrating two office cultures (which should have been a primary consideration in the acquisition decision), one location’s modern office space and the other’s dingy old warehouse, may breed discontent. It may mean your office space needs an upgrade.
      • New location – The outcome of the acquisition may mean relocating a distribution center more centrally or eliminating excess/redundant facilities. The complexity involves personnel, logistics, notices, etc. During integration project management and planning, the move and/or elimination timeline should begin within the 90-day window, thereby setting expectations. The plan itself need not be complete in that timeframe.

General integration concerns to be aware of:

  • If the reporting entities remain separate, define the allocation of the costs of any of the above.
  • Define the change in each team member’s role. Define the integration of new team members. Are there opportunities for growth on the team?
  • Communication styles play a big role in setting new team members up for success during the restructure. Using some initial testing (DiSC, Myers-Briggs, Culture Index) may help in smoothing potential communication missteps. Your management team can communicate in the way the new team member needs to hear it.

Initial definitions of the “why” and “what” of the integration will help your integration project management team to direct the initial planning. Comprehensive due diligence during this phase will lead to a smooth integration. Remember, this is a team effort and the successful integration is not fully on your shoulders… although sometimes it may feel like it.

If your company is going through an acquisition, you may need further help in the integration. I offer a 2-hour free consult and would be happy to help. Reach out and let me know how I can guide your acquisition process.


Featured image via Pxhere. All images licensed for use via Pxhere and Burst licensing.

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