What will Private Equity do after they invest in your business?
Your team has worked hard to get the M&A deal done and the close is here, opening the door to day one of integration. But have you properly prepared for this day and the days that follow?
Being very clear on the impact this transaction will have on all involved is extremely important. While you do not need to share everything in great detail, if you are clear up front it can help alleviate many concerns and distractions, as well as allow individuals to identify new opportunities.
In all transactions, there are a series of actions that should take place in a tightly coordinated sequence — not just on the day of closing, but in the weeks surrounding it. Many of these events are critical to keeping operations running and teams focused. While having the overall plan mapped is key, it is important to prioritize actual day one changes to just those that absolutely must take place on or before day one — and then execute them flawlessly and communicate about them persistently.
Communication
Communication must be clear and concise — and cover all customers, employees, vendors, and other key stakeholders. What does this deal mean to them on day one, and when should they expect day two information?
The more articulate you can be about changes on the horizon, the more successful you’ll be. Even if the message is as simple as “nothing changes,” you must state it.
If you don’t spend enough time understanding and answering potential questions, it can create additional tension and distractions. Remember, many individuals have not been in the know and must now communicate with vendors, other employees, and customers about the deal. In most instances, human resources and finance are critical to this process; employees are a vital part of any M&A transaction.
Clear chain of command
Who is in charge of what? Identify the critical interfaces and determine any barriers that may impede people from doing their jobs. Think about this tactically, from a treasury and cash controls perspective — as well as how it may impact your customers. Set up well-defined clearing houses so employees understand how to resolve issues throughout the integration.
The acquirer must also have access to what it needs, from keys to system access. The transitional governance is crucial to the flow of integration, as well as being able to make timely decisions that align with the business’s intent.
Cadence
Define the speed at which you make changes. This can vary greatly based on a business’s culture, capabilities, and needs. Determine how to maintain the current momentum of the business without overwhelming the team that maintains it.
Cut-over
On the initial close date, you may be able to streamline the integration if certain actions are addressed at close. These range from glaringly obvious to easy-to-overlook: cash handling, bank accounts, and credit cards; payroll; employee benefits; systems; phone numbers; IT; and branding, among others. Make sure key functions and workstreams understand their cut-over considerations and it is clear what is changing and what is not.
Close support
To properly record the transaction, consider specific items — including closing the balance sheet with appropriate backup. This may be as simple as running reports, or it could require more complex actions, like scheduling inventories or changing procedures. Make sure there is someone at the helm who understands the terms of the agreements.
Culture
Throughout the process, consider the business culture at hand. Mergers and acquisitions can be an emotional process. Based on your due diligence, you should have an idea of the cultural norms that may need to be addressed in your planning and messaging.
The close day sets the tone for an integration. Establish clear direction that does not disrupt or freeze the organization. Find the right balance among your core areas of focus. Executing a well-communicated and well-planned day one can be a powerful catalyst to set you down the path of achieving your integration objectives.
For more information on M&A transactions, contact Amy Moore at amy.moore@CLAconnect.com or 781-402-6346.
Craig Arends is a principal at CLA and is the managing principal of CLA's private equity practice. Craig brings a concentration of experience in providing accounting and transaction structuring advice for leveraged recapitalizations, purchase accounting and SEC reporting, assessing quality of earnings, and GAAP accounting. He has far-reaching experience with critiquing financial models and reviewing target companies' financial performance to identify cost reductions and/or operating efficiencies Craig has more than 30 years of experience in public accounting serving public companies, private equity groups, and companies, including a term as principal in charge of a Big Four Capital Markets Group in Moscow, Russia. He has led financial accounting due diligence projects for private equity investor groups and venture capital funds, primarily in the technology, communications, and manufacturing industries, as well as assisting with Foreign Corrupt Practice Act matters ranging from investigation of payments made, validation of compliance with corporate policies, and review of proposed transactions to ensure compliance. When not working, Craig enjoys watching any sports, but his most favorite are baseball, football and soccer.
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