The Difficult Transition Phase Of The Acquisition Process

In our experience, the transition phase is the most difficult and critical aspect of the entire process. Once the agreement is signed, the steps necessary to make the acquisition a success must be fully planned and closely monitored.

Expected By-Products of a Succession Transition

The following represents just a sample pack of the sort of problems you can encounter following the acquisition of another business:

Confusion Indecisiveness Mistrust Breakdown in communications Power Struggles

Increased conflict and confrontation Loss of productivity Apathy and loss of excitement Secrecy Self-preservation and circling the wagons

Too few managers understand the critical nature of this phase of the acquisition process. The shifting dynamics make it one of the most demanding projects in business management. Successful execution of the process requires effective communication and establishment of clear and concise guidelines. These must be tempered with the flexibility required to adapt as the situation demands.

Communicating the Message

One of the greatest grievances expressed by employees following an acquisition is the fact that they feel marginalised. They feel that little regard is given to keeping them in the loop. The result is a sense of insecurity and frustration, which is heightened if their new role is not adequately defined.

Open, clear, concise and timely communication between the vendor and the purchaser and their respective staff is essential to minimise the uncertainties and fears that inevitably arise pursuant to an acquisition announcement. The employees of the acquired business are generally under great stress. Every word and move emanating from the purchasing business will be examined for clues. Unfortunately, but perhaps understandably, many actions of the purchaser are blown out of proportion.

Just as critical is communication with your other stakeholders, namely the customers, the suppliers and the broader community.

Steps you can take to minimise the impact include:

• Giving your troops clear cut marching orders
  
  
• Focus on short-range objectives
  
  
• Establish clear priorities
  
  
• Nail down each persons job
  
  
• Sell the benefits of the change regularly at staff meetings and allow time for discussions
  
  
• Get all resistance out in the open and talk about problems
  
  
• Beef up communication efforts – you cannot over communicate during the transition phase
  
  
• Anticipate and prevent communication problems before they occur
  
  
• Issue a press release

Morale Factors

Morale amongst staff members will impact on implementing a smooth transition. Without a sense of belonging and a buy-in to the new business employee relations will rapidly deteriorate. If this situation is allowed to develop momentum the outcome can be disastrous. Once the employee believes there is no foreseeable change on the horizon, they will resign out of sheer frustration. Important morale issues during transition include:

Job security Trust of senior management Recognition for good work Job responsibilities Opportunity for personal growth

Pay and benefits Clearly defined opportunities for advancement Positive work environment Effective performance evaluation process Involvement in decisions

Function of the Transition Team

The establishment of a transition team with the objective of implementing the transition plan and monitoring its success is integral to post-acquisition success. The transition team should be aiming to create an environment in which the employees perceive themselves as an integral part of the whole process and vital to its success. In our view, the best way to manage change is to allow, where possible, those affected to be a meaningful part of the solution. The transition problems should be defined and, where it is feasible, the employees affected allowed the opportunity of making suggestions to solve them.

The integration of two businesses requires three steps for each and every detail before decisions are made.

These steps are:

• Identify and understand each detail.
  
  
• Evaluate the impact of the status quo on immediate and future profits versus alternative approaches. A proper profit evaluation should be conducted.
  
  
• Determine the strategic implications of each approach.

The Follow Through

An assessment of the vendor’s management team and employees is an important element of the acquisition strategy. It will identify the key individuals who will contribute to the future success of the integration.

It is important to be generating a business strategy and focus on its implementation early. Transition issues are generally not addressed in sufficient detail during the negotiation proceedings. Acquirers mistakenly believe that they can be left till later as they feel that the transaction is already proving complex enough while completing the negotiations and acquisition. In our experience, purchaser dissatisfaction is often due to inadequate operational due diligence (as opposed to financial analysis) prior to finalisation of the transaction.

In most instances, the purchaser’s executive team experiences a letdown after the often long, protracted and intense process of negotiation and documentation required to complete the transaction. To maximise the benefits of the acquisition the same amount of effort expended in the acquisition phase should be devoted to the transition phase.

In the transition phase purchasers can be disappointed with the results of their acquisition. This can be due to an over estimation of the value-added component. It is important for the purchaser to clearly uncover and make operational the key success variables associated with the acquired business. It should be remembered that it is often easy for a purchaser to overplay and/or over state the potential benefits of an acquisition. Issues to be addressed can include:

Cultural distinctions - often underestimated is significant differences in corporate culture. This needs to be identified early and handled by the transition team appropriately.

Reporting differences - what seems like a simple matter at acquisition time can turn out to be a matter costing significant time and resources if the reporting systems of the vendor’s business do not meet the purchaser’s standards.

Inclusion of operational staff - to ensure post acquisition success, it is important that operational staff is involved in the pre-acquisition phase. Senior management alone should not assume sole responsibility for acquisitions.

Maintenance of focus - management is under substantial pressure to produce results and move quickly to integrate. It must justify the acquisition to stakeholders. It is difficult but management needs to work especially hard and take care that it does not stop running the purchaser’s business during the transition phase.

Finally if we were to select one area to stress, the importance of timely, clear communication during the integration phase cannot be overemphasised. It is absolutely essential to a successful integration.

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