Post-acquisition employee and customer integration is where the rubber hits the road and often determines the ultimate success of the acquisition.
I’m a current M&A advisor, having successfully sold my business after 15 years. In my career, I have seen deals that look so good on paper fall apart because the integration of the operations, the customers, or the employees fails. The only part of the acquisition process that doesn’t rely on a spreadsheet or piece of paper but rather on human behavior, is the actual post-acquisition integration.
Recognizing the Human Element in Integration
Many PE analysts forget that employees such as techs and sales reps are people, and people, unlike PE firms, are not necessarily motivated by money and certainly do not operate in a vacuum. Take me for example: when I had to meet with my heating oil delivery drivers, those meetings often occurred on the coldest days before 6 am. I would dread getting up on a cold morning before sunrise; however, when I’m skiing in Colorado, I can’t wait to get up early on a cold morning. It’s all in the attitude. One would be amazed at what employees can and will contribute if they believe the new management will improve theirs and their customers’ lives.
Navigating Customer Integration and Retention
Customers integration and retention is complicated. How often have you walked by a generic product on a grocery store shelf only to buy the brand you like, even when you know the products are most likely identical? Whether you believe it or not, buying is an emotional decision supported by rational thought. If you are acquiring customers, learning why a customer sees value in the company and maintaining that continuity is essential. I remember one example of a company I advised whose single operational goal was to arrive at a call in less than four hours. This buyer was determined to bring that standard to his newly acquired company. However, the acquired company had already evolved to the point where their customers were getting notified via text and email an hour before the tech would be dispatched and again when the tech was on its way. With this system, a homeowner can go on with their day, trusting they will be given ample time to get home. In today’s market, we have learned that customers value their time and can easily be reached. The idea of waiting at home for a service tech, even within 4 hours, would be a step backward for that operation.
Ensuring Successful Integration
A deal will only succeed when the human elements, such as employees, customers, and strategic vendors are considered in the planned integration. Without the experience and insight to anticipate these issues, perhaps not in year one or two but by year three, you will have lost key personnel and the customers with them.
After 25 years of M&A experience, we have learned to ask the right questions and take the necessary steps to ensure that the deal goes smoothly on paper with all the financial objectives met but also focus on making sure the integration is successful. Successful integration makes the employees and the customers have confidence that this acquisition was in their best interest and will add value to their relationship with the company.
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