My experience as a Corporate Development Director was with a product company, which was the foundation for my hands on integration experience. The complexity of the integration always revolved around such things as product registrations, sales and manufacturing continuity, and transition of management.
At Third Coast Capital Advisors, I’ve encountered various client business models, which has exposed me to different integration priorities. In recent months, I’ve been engaged with Haskell, a design-build firm based in Jacksonville, Florida that has acquired several services businesses. For specific insights on integrating a services business I turned to Brad Slappey, CFO of Haskell.
Brad will be the first to tell you that these integrations each had their own specific challenges. In some areas, the integrations went very smoothly, but in other areas, Haskell learned some great lessons. Brad shared with me three integration priorities, which represent best practices and lessons learned.
Put a Company Representative on the Ground
After announcing a transaction to employees, anxiety levels can run at a fever pitch. Starting on day one, or perhaps even before, put someone on the ground at the acquired company headquarters. But this can’t be just anyone. Whomever you put on the ground, needs to represent your company, and should be at a senior enough level to provide the acquired company’s management team access to your executives. Brad would recommend that you assign at least a director-level employee on the ground.
The really critical responsibilities in this role are to:
1. Help coordinate integration
2. Serve as a “translator” between your company and the acquired business
3. Assist with cross-sell and up-sell synergies
Depending upon the acquisition and the intentions of the existing management team to either stay or exit the company, you may consider relocating this company representative for a period of two or more years. This is about how long it takes to ensure that sufficient integration has been achieved, and that succession plans are in place.
This role should stand apart from the reporting structure of the newly acquired business. For example, the director-on-the-ground may report to the CFO, while the CEO of the newly acquired company may report to the Chief Operating Officer or CEO of your company. The purpose of this reporting structure is to allow for independence and to create redundancy, to ensure that the integration is running smoothly from the perspective of both sides.
Focus on Getting HR Right
In a services business acquisition, people are almost always your most important asset. Getting HR wrong, can lead to defection and loss of value. Things such as benefits, compensation, bonus plans, etc., may seem obvious to the acquiring company, but are not always clear, and hit very close to home to each individual affected by the acquisition. Haskell gets its HR team engaged early. They spend a lot of time on the ground, often individual by individual, or at least role by role.
Beyond the basics, people want to know where the acquirer intends to take the business. They want to know what opportunities this acquisition has created for them. Therefore, career development discussions at a very early stage are not just appropriate, but tend to alleviate some of the anxiety associated with the acquisition.
When should your HR team begin communicating with the target company’s employees? Since employee due diligence is often an essential element in a services business acquisition, the team may be able to start communicating with employees about these topics between LOI and closing.
Implement a Quick System Integration
Integration of ERP and accounting systems can take months and sometimes years. But there are some simple areas of system integration that if not done early on, can create a lot of frustration. As soon as possible, get the acquired company’s employees access to new email addresses and the company network. If you have cloud-based systems, CRM systems, or other proprietary software systems, the sooner you can give access to these the better. Taking these relatively simple steps can go a long way to making the early-stage integration smooth and to giving the impression that your company is on top of things.
If you review these three priorities, there is a clear theme. Getting integration right in a service business acquisition requires getting things right with people.
I appreciate Brad’s contributions to this article and look forward to any questions or comments you may have as a reader.