As a business owner, there is undoubtedly a sense of optimism involved with a merger. By joining forces with another business to expand operations and tap into a new market, there is an opportunity to realize upside that may not have been possible when operating on your own.
However, no matter how much you look at selling a business checklist or estimate revenue for the new venture, there is simply no way to avoid the disruption that the change will have on your company workflow. To help in this regard, keep reading for 5 impactful tips to reorganize company workflow after a merger.
1. Consider the Impact of Emergent Factors on Financial Statements
Although there are numerous reasons to perform a merger, future profit potential is arguably the greatest motivator. When going through the business valuation process, companies can use earning multiples and market share metrics to get a reasonable estimate of what their company will be worth by joining forces with another firm.
However, these are just estimates, and it is critical that you build in a number of emergent factors when creating the financial statement forecasts for the newly combined firms. It goes a lot deeper than combining the revenues, COGS, assets, and liabilities of the separate entities and believing that this figure is what you can expect for the new company. Some unique costs of a merger to consider include:
- Employee defection and decreased productivity amid the uncertainty surrounding the merger
- Hiring and training new team members for emergent roles in the new firm
- Customer defection and customer overlap
- Marketing and rebranding efforts
And these are just a few of the many emergent costs associated with a merger. While it seems like these factors should be taken into consideration prior to acquiring another firm, McKinsey research finds that only 15% of companies undertake detailed financial projections during a merger–perhaps explaining why so many mergers seem great in theory and fail in execution.
2. Identify Strengths and Weaknesses
It is fallacy to believe that all mergers will result in synergies that create a whole greater than the sum of the separate parts. In fact, the exact opposite happens all too often, with the newly formed company failing to live up to how it performed prior to the merger.
This is often due to having a shaky understanding of both companies’ strengths and weaknesses and automatically assuming that having more employees, resources, and customers will fill in the gaps by default.
Therefore, it is critical to thoroughly assess strengths and weaknesses following a merger. Dive deep into the financial statements and identify any areas of concern that need to be addressed first. Create a “depth chart” of your staff and see if there are any redundant or superfluous roles, or if there are any professionals who are being underutilized. Scour customer reviews and ratings to get an idea of what is and is not working.
Ultimately, your best asset is your team. Solicit feedback and request interviews from long-standing employees and get an idea of what is and is not working on both a micro and macro level.
3. Be Transparent With All Team Members
To help mitigate some of the uncertainty inherent to post-merger change, it is critical that you be completely transparent with all team members during the transition process. Some ways to do this include:
- Explaining the motivation behind the merger
- Ask for their feedback and assistance as you develop new business processes
- Communicate with employees as soon as possible to let them know if their role or status with the company is changing
- Be visible on a day-to-day basis, prioritizing relationships over profits
Top-shelf communication and transparency throughout the merger is the best way to establish trust with your evolving team and keep everyone working toward the greater good.
4. Work to Unify Culture and Core Values
If you look at the top reasons why M&A fail, most lists will be peppered with items such as “loss of values” or “incompatible cultures.”
The “why” behind your business is just as important as the “how,” and too many mergers get caught up in how the day-to-day workflow will look for the new company that they forget to focus on establishing these all-important intangible aspects of business.
Therefore, make cultivating culture and establishing goals ongoing priorities for the new company. Don’t just assume that what worked before will continue to work and understand that values will change as your company grows and evolves.
5. Keep the Evaluation Process Ongoing
The time to finalize a M&A has risen a whopping 31% over the past decade.
And that’s just getting all of the paperwork and legal formalities out of the way.
In practice, a merger is not complete until the two separate firms are operating as one cohesive whole–a process that can take years.
As a result, don’t just assume that the merger is finished once you have completed all of the other steps on this checklist. Understand that the change will be felt by employees, customers, and the communities long after everything is finalized on paper, so continue to evaluate your business as an evolving entity.
5 Pro Tips for Reorganizing a Company Post Merger
Despite the upside, a merger will result in change that can be scary and upsetting to company workflow. To help avoid any pitfalls, consider the unforeseen costs on financial statements, identify strengths and weaknesses, be transparent with all team members, work to unify culture, and develop an ongoing evaluation process as 5 pro tips for reorganizing a company following a merger.
Contact Red Beach Advisors to discuss your company post merger and best ways to navigate any troubles to your current workflow.