Integrating an add-on acquisition can be challenging. Whether a transaction provides the expected benefit is largely driven by the quality of the integration plan and its execution. Realizing the full value of an acquisition is dependent on managing the post-close integration phase successfully and with the right players in place.
Planning and executing integrations that create value takes expertise. The guidance of an experienced, strategic and impartial CFO to navigate the complexities of post-close integration can make an invaluable difference in the outcome. From optimizing costs to expanding offerings, the right CFO can analyze financials and operations to maximize value in several ways.
Here are 5 tactics for successful post-integration value creation.
- Optimize Costs. Optimized costs are not the lowest costs, they are the best costs. A strategic CFO can assess the new combined entity and ensure it carries a new cost structure that reflects the necessary resources to achieve planned combined revenues. Negotiating contracts, streamlining operations, outsourcing and workforce management should all be considered when setting the plan. Each consideration must have an analytical and strategic approach that goes beyond traditional cost-saving and incorporates the protection of the brand. Be careful with cost synergies that could be a detriment to the brand.
- Consider Geographic Coverage. Geographic duplicity may or may not be acceptable in a service area. It all depends on the level of existing and potential market penetration in that area. This type of critical decision necessitates guidance from an expert resource for analysis and strategic planning of all phases. Supply chain considerations can impact integration plans as well and in ways that seem counterintuitive. How does Amazon, a huge internet-based retailer, provide such prompt delivery to its customers? By having distribution centers strategically placed in large markets. Decisions like these take the analytical know-how and cross-functionality understanding to develop the winning plan that a CFO can bring.
- Expand Offerings. Product development/innovation, partnerships, e-commerce and vertical integration are all means to the expansion of services/offerings for a company and should be considered in the plan for value creation. This is especially true when the acquisition results in an expanded platform for new product or service launches or where the acquired product/service market penetration can be enhanced with resources from the new combined organization. Creating synergy between the new combination of resources comes from strategic CFO leadership to help quickly uncover and identify the opportunities that can easily be overlooked in a transitioning environment.
- Systems Integration. Systems integration is key to achieving planned value in an add-on acquisition. The new combined entity should, if possible, operate on a single technology platform. If the entities operate on two different ERP systems, plan on converting to one and having an experienced CFO lead the process. The same applies to HRIS/Payroll systems along with financial reporting systems. When selecting HRIS/Payroll systems, it is preferred if the system includes 401(k) record-keeping services and applicant tracking capabilities. This avoids duplicate maintenance and is very useful in businesses with high turnover. Approach systems integration without bias. The acquired entity may be bringing systems that are superior to existing ones from a capability or cost perspective or both.
- Celebrate Successes to Foster Buy-In. A good integration plan is critical, but it is just that: a plan that needs to be executed. Executing the plan requires buy-in from the team. You can foster that by celebrating successes during the integration. Creating and fostering buy-in with all team members increases the probability of meeting or exceeding planned goals. A CFO works across all the functions within an organization and can see the important roles that each employee plays. Working hand in hand with the teams, an experienced CFO knows how to effectively motivate, follow up, and apply the right type and amount of pressure for a successful implementation.
Having a vetted plan and adherence to the time budget is critical to achieving planned results. Time can be the greatest enemy of value creation, and it is a factor that can be hard to control. Getting help early in the process gives a company a crucial advantage for generating a positive outcome, and with the right leadership to guide, maybe even better than expected results. Engaging a CFO who specializes in post-close integration planning is a wise choice for ensuring a successful post-integration.
Paul Jurewicz is a Partner on the Midwest team of SeatonHill. Jurewicz is an adept senior executive with a demonstrated record of accomplishments in manufacturing and service organizations. He is a strategic CFO, known for skillful management of challenging environments with his outstanding leadership and communication skills, building high-performance teams and making difficult decisions. He has a proven ability to forge and maintain sound business relationships and lead organizations to achieve operational excellence and bottom-line results. He has also led due diligence teams and created integration plans for health care M&A transactions exceeding $1 billion.
