5 Steps To a Successful Merger

Phil Moore

Managing Partner

December 8, 2017

As we head into the New Year, many businesses may be catching the merger mania bug. But if it hits you, do you know what to do or where to start? Based on our own experience and helping guide clients through the process, we’ve seen that the most successful mergers resulted from a combination of diligent pre-planning, thoughtful identification, good communication, solid execution and being open to learning from other’s experiences.

Step 1: Plan. Plan. Plan.

Having your ducks in a row internally in addition to having all parties bought into the strategy and value well before the merger takes place are artfully important. Before you go running down the merger highway, you should not only make sure your own processes and systems are in good order, but also determine if your team has the capacity to take on the additional responsibilities of combining two organizations. These demands could be anything from handling the volume of additional transactions to the ability to rationally determine what processes or systems should remain and which ones should be changed. It’s also important to ensure agreement among not only the management team, but also by the Board, Family or whatever governance structure your organization has in place. This agreement, support and buy in will ultimately pay dividends as you work through a combination. 

Step 2: Know What You’re Looking For.

Having a good understanding of what you are looking for (as well as what you aren’t) is another major success factor we’ve seen when considering a merger. Being strategic and focused both in your initial searches and discussions, as well as throughout the entire process, will help identify and eliminate the “frogs you’d rather not kiss.”

Along with lines of business, geography, financial compatibility, work force skills and talent, and customer expectations, a comprehensive assessment of the cultural alignment of the two organizations is critically important. Embarking on the process with the false notion that you can make two mismatched cultures dovetail with one another is often a challenge too steep to overcome; not to mention it significantly diminishes the value of the effort. We’ve seen that the wrong cultural fit – such as stark differences in governance processes, compensation expectations, customer service philosophies, work arrangements, and feedback – can kill more deals than any other factor, as it rightfully should.

Step 3: Communicate Early and Often.

Solid, open lines of communication directly between both parties becomes the next critical step. No different than in any other relationship, communication is the foundation for the ongoing process of developing a connection and building rapport that hopefully lasts well beyond the discussion and negotiation phase, and is the critical element to building trust. This trust will be vital not only during the due diligence process, but also as you address the bumps and hurdles that will naturally occur along the way.

It’s important to be candid and honest, keeping in mind that this will be a stressful time for both parties. Emotions are inevitably high as everyone involved is to some extent dealing with the feeling of the “dog catching the car.” As expectations and agreements are drafted, keeping the communication lines open will also help you remain on the same page and work through these details as they become agreed upon and documented. 

Step 4: Be Bold.

Going back to what we mentioned in Step 2 – know what you are looking for well in advance and don’t be afraid to speak up. Solid execution starts with having the courage to make the tough decisions that are needed, coupled with the right amount of patience and compassion based on the pace and expected level of change for your unique situation. Following the agreed upon plan and path helps to set appropriate expectations, and the consistency this brings is valuable in eliminating uncertainties. A high level of execution also creates a standard for how business will be done in the combined organization – another ongoing value.

Step 5: Have a Sounding Board.

The final, and maybe most important step, is to leverage any relationships you might have who “have been there and done that.” Those that have been through the process before can share not only their triumphs, but also war stories and maybe even their scars from battle. Having a trusted resource to bounce thoughts, concerns and ideas off of is invaluable, and identifying that resource early in the process can be a game changer. Keep in mind this will only work if you are comfortable enough to listen, learn and truly utilize the feedback they have to offer.

So, if you are still reading and haven’t run for the hills, you’ve now gotten a few experiential tips to mix into your process. As you evaluate your next merger opportunity, stick to these five basic steps and you will be even better prepared to “knock it outta’ the park.”

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