Cookie-cutter approaches to integrating platform companies are a surefire way to limit your abilities to achieve acquisition goals. There are many ways to do it wrong, and no single, one-size-fits-all approach to doing it right. Some of the more common mistakes include:
- Letting earnout terms play out in the operating infrastructure for too long. If it’s hands-off during the earnout period, you need to evaluate whether keeping the acquisition on a separate P&L really makes sense after the earnout ends. Too often, these structures persist and limit the company’s ability to achieve full economies of scale by centralizing key functions such as accounting or call centers. Instead of compensating former owners on full P&L, it may actually make more sense to move key functions such as AR and collections into a centralized service model before the earnout ends. It’s important to get these considerations on the table during IT due diligence.
- Assuming that it always makes sense to integrate all of the acquisition’s business functions into the parent company’s model. Evaluate each functional area on a case by case basis. Leverage better and newer technology and business processes within the acquisition. Remember that the most successful mergers are transformative of both the acquirer and the acquired company.
- Assuming that you can just dust off the m&a integration plan for your last acquisition, adjust the dates, and march to the same tune. Every acquisition is unique, and while it makes sense to follow a common integration approach and methodology, flexibility and agility are keys to success.
- On the tactical level, one big mistake we often see is trying to integrate a new business into a business operating architecture that is not adequately documented. Every implementation or transition date for a particular business function/system has impacts that must be defined and communicated to multiple stakeholder groups within and outside the company. Put your entire business platform (people+process+technology) under change control and understand and communicate the changes appropriately.