Post-transaction integration can be a complicated and delicate process. While the acquisition of a new portfolio company is a significant event for a PE firm, the real challenge lies in the integration of the new company into existing operations. Poor integration can lead to a loss of value, employee dissatisfaction, and customer churn. It is therefore crucial to optimize the integration process to make sure the acquisition delivers the intended results and overall creates value for the firm.

Read on as we explore five ways to optimize your next post-transaction integration, overcome common challenges, and ultimately unlock the full potential of your acquisition to best achieve your investment goals. Along the way, you’ll find video clips and poll results from our recent webinar on this topic. Register now to watch the full event on demand.

Interested in more value creation content? Don't miss our next webinar.

2. Assess the whole plan, then prioritize

By involving industry experts and subject matter experts alongside the diligence team, you can get a head start on identifying critical components and prioritizing them based on importance, ultimately expediting value creation. The sooner you understand what the future-state organization looks like, and the more structure you have to pull together people, processes, and systems quickly, the more likely you’ll have success.Accordingly, firms must take care to assess their entire integration plan and prioritize tasks based on the unique aspects of the integration. Some will want to prioritize the to-do list based on cost, or what can be executed in-house vs. externally, but it’s typically best to sort by what’s most critical with relation to the target company’s characteristics and capabilities and the firm’s investment thesis.There’s no one-size-fits-all approach to successful integration; every integration is a unique undertaking, whether it’s a small or a big deal.

Consider:

• What made this particular asset important to the organization – the people? the processes? the systems? How can that be reflected within the integration plan?
• What needs to be integrated now, and what can be left to be done as needed later? What are core-critical, Day 1 activities; what is part of the 100-day plan; and what can be left to post-100 days? (Within the larger plan, it’s critical to plan for Day 1, focusing on immediate tasks needed to “flip the switch” and operationalize the new entity, such as making sure everyone is paid on time, from employees to vendors.)

• What will produce the biggest return on investment – or, conversely, what could potentially lead to failure if not done?

Market conditions must also be considered, as they can impact the “need for speed” and strategic plan – e.g., sometimes the situation calls for not a holistic integration, but rather an initial focus on a key element of the supply chain or elements of the process or cost centers related to business operations.

This proactive approach to planning can help address any potential roadblocks, minimize the risk of delays and cost overruns, and secure early wins.

4. Manage risks of integration

One key area to consider is cybersecurity. Being acquired can expose the target company to new and unknown cybersecurity risks. It is critical to carefully evaluate the company’s cybersecurity posture and implement necessary measures to protect sensitive data and systems.

It’s important during an integration to preserve the value of the acquired organization and not expose it to any significant new risk events. Risks should be evaluated and resilience and security measures put in place so that everyone can focus on the integration plan and continuity without a breach or other disruption.

This risk management responsibility falls squarely on the acquiring company, which must safeguard its own assets while also securing the acquiree’s. Take care during diligence and beyond to know the risks before they surface and to provide additional support and leadership where necessary.

5. Simplify

Streamlining business operations is essential to driving success and staying ahead of the competition. One of the most effective ways to achieve this is by consolidating the multiple operating models brought by the buyer and/or target(s) into a single, standardized, best-in-class approach that can be implemented across the organization. This approach simplifies processes, reduces redundancies, and creates consistency, all of which can lead to increased efficiency and profitability; it also facilitates comprehensive reporting to investors and other stakeholders.

Consolidating operating models can be overwhelming, especially for companies that have undergone multiple acquisitions. To minimize this difficulty, companies should focus on one acquisition at a time, as they happen, rather than wait to tackle multiple simultaneously. This approach allows businesses to address the unique challenges presented by each acquisition and implement the necessary changes. Taking a measured approach to integration also helps companies maintain their agility and adaptability, two critical components of success in today’s rapidly changing business landscape. Having one solid, standardized, fully integrated operating model keeps the overall entity nimble and prepared for the next acquisition, exit, or other significant transition.

In conclusion

A successful post-transaction integration is critical to realizing the full potential of an acquisition. However, as many investors know, integrations can bring challenges, potentially leading to missed opportunities and lost value. This is where the rubber meets the road, and where many deals falter. In the end, the success of a private equity deal often ultimately depends on a well-executed integration plan. Careful timing, thorough planning, and the coordinated involvement of both deal and operations teams throughout the process are critical to long-term success.

Contact

Kim Clark Pakstys, Managing Director, CFO Advisory

703.744.7445

Stephen Mancini, Director, Technology+

646.762.3410