Every year, companies spend more than $2 trillion on acquisitions. Most are doomed to fail—and some do so catastrophically. Many issues can cause a transaction to under-perform, but one of the most common concerns is a failure of post-closing integration. It’s easy to pay attention to a transaction once it has closed. Thereafter, many owners allow relief to set in. They get distracted. They get exhausted. And they don’t do everything they can to ensure seamless integration. That’s where an M&A playbook can make a world of difference.
How an M&A Playbook Can Ease Integration Woes
An M&A playbook can help a company achieve its transaction goals by defining those goals and establishing a strategy for reaching them. The playbook is a series of principles and best practices that should guide every stage of the transaction. It can aid the due diligence process, uncovering relevant issues early. It may also draw upon lessons from previous sales, and provide details about the company’s unique culture or any special challenges it has historically faced following a deal closing.
What to Include in an M&A Playbook
There’s no formula for an M&A playbook, since every company has a slightly different set of needs. In general, your playbook should include:
- Human resources information, including details about the impact of the transition on employees, and plans for mitigating any negative impacts.
- Business processes, including a list of key processes for both the target and acquiring business.
- A detailed overview of organizational structure. This should help guide the process of integrating two teams into one.
- Guidelines for data management, including a plan for managing the redundancies inherent in two systems.
- Legal issues such as the role of legal counsel, the division of responsibilities between the two companies’ legal departments, and the key operating or governance policies that may present sticky integration issues. The legal component of the playbook must also identify contractual issues, and outline a plan for managing them. Be sure also to address legal entity issues, such as changing the legal status or structure of the new business and dissolving, if necessary, the old one.
- A comprehensive list of disclosure documents, and the parties to whom they must be disclosed. Consider adding a disclosure schedule as well.
The goal here is to set and manage expectations. The process of developing the playbook ensures everyone is on the same page, and provides an early tool for addressing different goals or expectations. While the document should be an evolving, living book, repeated deviations from the playbook may hint at an underlying problem—especially if you must deviate because of missed deadlines or continual disagreement among the parties. Early consensus promotes M&A success, so iron out as many issues as you can as early as possible.
The Playbook: A Tool, Not a Panacea
Your M&A playbook is a tool, not a drug that can cure all that ails a transaction. No transaction is fully within the control of the parties. Unexpected issues are inevitable. A flexible approach informed by industry best practices and the input of professional advisors is the ultimate key to unlocking M&A success.