By Global Services on April 1, 2024
MERGERS AND ACQUISITION (M&A) INTEGRATION
For years now, we’ve heard about how M&A in the GovCon industry was at an all-time high. We’ve seen big deals, small deals, stupid deals and incredibly smart deals and everything in between. But as things have slowed down (at least at the highest echelons), you have to ask, how’s it going?
How many people have seen the…. wait for it …. synergies (buzzword!) they expected to see from their acquisitions? How many companies have really seen the 1+1=3 equation they touted would be there? How many acquiring companies have retained their seller’s teams? We know there have been some success stories (please contribute in the comments) and we know there have been some notable failures. But what about all the in-between deals? You know, the ones where the revenue contribution has been decent, as has the additional contract vehicles and SMEs. But it’s just not to the level that they thought it would be in execution. They just aren’t meeting the numbers they thought they would. “It’s….fine.”
My hypothesis is that it’s because of the integration post-acquisition. No one really does it right. The amount budgeted is always well short of what’s needed. We all aspirationally think that it will go swimmingly, and that it will take less time and less money than the reality. We think our folks can do integration work and their full-time jobs. We think it’s only an hour or two a day or < 20% of their time.
We expect folks to work miracles when all the bankers, lawyers, and high-paid consultants have left. They had the signing dinner, they saw the wires come in and after spending all your time with them for months, they have officially left the building, leaving you wondering what the heck it is you just bought. Suddenly all the decisions made in whiteboard sessions under secrecy in a conference room at your lawyer’s office come home to roost. What sounded easy, what sounded quick is now neither. And now…people. The buzz has worn off, the insecurity is here (are we going to keep this department? This person? This technology?), and folks now must actually work through the details. The details of the details. And we all know that the devil is in those details.
- Asking your team to not only do their full-time jobs but also integrate an entirely new company and its hidden warts after going through all of the work leading up to the acquisition is foolish. 1+1=3 may happen at some point, but it’s 100% not happening in the first 6 months post-transaction.
What actions make for a higher probability of success and finding those true strengths post-merger?
Budget. Make sure you’ve actually budgeted for the integration efforts. You will need more people for a time (whether outside consultants or pulling people off their own day-to-day work or short-term hires). There is a surge of activity post-signing that goes on for longer than you think it should. - Realistic expectations. You aren’t going to combine the two companies in 2 months. It’s going to take a while to get systems aligned, people in the right places, streamline operations and have consistent reporting. This process may take a year, sometimes more. It’s never as simple as changing the website and moving the payroll. It took years to build the seller’s systems and it’s going to take time to extract from them.
- People. People make this entire process harder. Change is uncomfortable. The seller’s organization is going to have uncertainty and doubt. They will have to be brought into the fold. Even if kept as a separate entity/division, there is still work to be done to streamline into the fold for reporting purposes. Change management and over communication is key.
- Fear. It makes sense that folks will be reluctant to try new things, new ways, and to give up whatever power they have over the information they hold. There will be naysayers and those whose protectionist attitude will work against the integration. These are normally the first folks that must go. But finding them isn’t always the easiest thing and they have information you will want to keep (and they know it). Find them early and terminate.
- Seller Leadership. Keeping the C-suite around for their earn-outs means they are there… second-guessing your every move and undermining credibility with their former teams. We’re not saying they can’t be useful but get them out of there as quickly as you can.
Integration, when done well, can make or break the ROI on a purchase. It can help yield all the results you touted in the first place and can actually make the organization much stronger. When done poorly, it can erase all the goodness the purchase was supposed to accomplish, including plummeting those profits.
The team at BOOST has been working with folks on successful integrations and we specialize in providing enterprise-wide mergers and acquisition (M&A) services, along with comprehensive post-transaction integration support. Give them a shout if you need help so they can help your organization prioritize post-transaction integration to fully realize the value and synergy of the deal.
About BOOST’s CEO, Stephanie Alexander
Stephanie Alexander has spent more decades than she wants to admit supporting high-growth government contractors with an eye toward their bottom line. She is the CEO and founder of BOOST LLC which supports back-office functions for government contractors. She is a co-founder and Partner at govmates, a free teaming platform and technology scouting tool to connect businesses across the federal landscape.