POST MERGER INTEGRATION
By
Sam Boyer
There is becoming a significant body of evidence
indicating companies that acquire or merge with others generally under
perform when measured against the benchmarks of their own industry. The
beer distribution industry is not immune from this occurrence. The primary
cause for this lack of performance by recently merged companies tends to
be the poor job they do in the post merger integration process.
The acquisition or merger process does not end at the
closing table; it's only beginning. In a significant number of client
engagements shortly after they made an acquisition or completed a merger I
have found there to be little forethought as to how to make the two
entities into one seamless operation. Operational problems took center
stage, sales lagged, and customer service suffered.... all due to the lack
of planning by the buyer.
This planning must start even before the initial
negotiations with the seller. You must work with your key managers and
advisers to solidify a plan of how the acquisition will be systematically
integrated into your organization. Without this plan early in the process
you will make many changes over and over.....frustrating employees and
customers....and not accomplishing your goal of a single profitable
organization.
Communications is of primary importance in the
integration process. From the beginning you must involve those individuals
that will be responsible for the day to day operation of the new
organization. Without their involvement they will not "buy into"
your plan. Then your plan is doomed. Not only do you need to involve your
key managers and professional advisers you must also involve the key
managers of the acquired company.
Work together as a team. Review all aspects of both
companies and identify every point that must be addressed in the
integration process. Whatever you do.... don’t go it alone. Too much
secrecy will limit your ability to manage a smooth integration process and
increase the fear of change. Fear of change is not limited to the
employees of the acquired company. Many of the customers will also need to
have their fears reduced and assured they will receive product and
merchandising support to satisfy their needs.
The post merger integration plan will start with a
measure of the market workload for the combined organization. This measure
will have to consider all the accounts to be serviced, their combined
case/keg volumes, selling system (pre-, driver-, or tel-sell), and
frequency of service.
From this measure of market workload you will be able
to determine the number of sales and delivery routes necessary to service
the accounts. After this critical step is completed you can begin on the
following:
- Design a preliminary organization chart. Be clear on reporting
relationships. Identify early in the process who will be key managers
and supervisors.
- Determine payroll costs. This is the number one expense and major
factor in profitability. If this expense consumes too much of your
gross profits you will never be profitable. Control payroll costs from
day one.
- Assemble proforma financial statements. Use these to identify
opportunities and possible problems. Work with your key managers and
advisers and be financially prepared for the unexpected.
- Layout sales and delivery routes. Do this weeks ahead of
implementation if possible. The longer sales and delivery personnel
have to refine the routes the better they will flow when implemented.
- Determine warehouse staffing. Having additional products in the
warehouse and more routes will necessitate a change in this area. The
loading process usually becomes a major bottleneck; make sure you are
prepared.
- Write position descriptions. Many individuals will be in new
positions; make sure they fully understand their duties and
responsibilities.
- Implement personnel policies. You will have a significant number of
new employees; make sure they understand the policies pertaining to
their continued employment.
- Put together compensation plans. Do not go into the post merger
integration without every employee knowing what their compensation
level is and how it's earned. Nothing will demotivate existing or new
employees more than to have their compensation plans change and not
have the change(s) explained clearly to them.
- Roll out the new organization. Do this as soon as possible after the
closing. If you are able to get all the above completed.... roll it
out the day after the closing.
The above are the major tasks necessary to have a
successful post merger integration. The process is heavy with details and
pitfalls. It will take weeks to plan and implement. Make sure you allow
enough time to accomplish this most critical task. Those beer distributors
that planned for post merger integration have reaped the rewards of a
larger economic size immediately. Their sales and profits are achieving
the levels required to make the acquisition/merger a success and to exceed
the beer distribution industry benchmarks.
