5 Proven Reasons why M&A Integration Teams should be a blend of internal and external resources
The challenge for many organizations relates to the adequate skills left in their organizations, and they should focus on trying to have always a blend of internal and external resources in the M&A integration team.
The current pandemic has slowed down the activities in the world of M&A. As the world gets vaccinated and starts opening, we expect a surge of activities in the near future. Businesses that had pushed back their ambitions, are coming to terms with the new-normal and are reinitiating their M&A processes. There are also, businesses that are cash-strapped and desperately need a helping hand to remain in business. Both these factors will lead to an increase in the number of M&A transactions.
Guess what, like in the past, there will be inward looking, self-centric businesses that will insist on building the capabilities in-house. And there is some merit in that thinking.
The initial thoughts always are that M&A is an important strategic maneuver for any organization and thus, it must have all the required integration capabilities in house.
Unfortunately, in today’s world, this could prove to be a redundant overhead in the long run.
Internal resources bring in contextual and institutional knowledge. They bring in deep understanding of industrial nuances. Their organizations have a certain leadership style and a presence in the market. They work and thrive in their own organizational culture.
And all these are absolutely vital for a successful integration.
But there are many more skills that must be sourced from the market.
Here are five proven reasons why organizations must leverage a balanced team of internal and external resources.
CORE BUSINESS ACTIVITY
For decades, organizations have been recommended to build their main expertise on areas that are core to their business. This can range from engineering capabilities, manufacturing, software development to providing healthcare, utilities, and services. One noteworthy thing is that nobody says that M&A is a core activity unless they are a bank, a financial institute, a law firm, a broker, or a consulting company where M&A is a product that they sell.
M&A is a strategic avenue for businesses to increase their financial numbers overnight or get access to new technology or new markets instantly, but it is not a core-expertise.
Even for serial acquirers, it is an important skill to have but not a core expertise.
CAREERS IN CORPORATE
In most corporate organizations, individuals stay in specific roles for a period of 2-3 years before they move on to their next role. Unless you are a middle- management person who does not want to climb the corporate ladder, chances are most others would not stay in the same role beyond that period. In fact, if you cannot move to a new role after a period of 3 years, people start questioning your performance ability.
On the other side, apart from small tuck-ins, most integrations take time. It is unlikely that an individual can be involved in more than a couple of integrations during the stint in their respective roles before they move on, to another role.
There are also people who would assume operational roles once an integration project is over.
That is why, internal unwanted attrition remains a big challenge to develop integration capabilities.
Integration expertise is a combination of several disciplines. It combines finance, HR, understanding of technology, operations, sales and marketing, and other functions. It also, involves several inter-disciplinary activities including change management and communication. Along with it, you also need great program management and influential skills.
Integration expertise is developed over several M&A cycles.
All these factors make M&A integration resources valuable and thus expensive.
Most companies are not serial acquirers. To have these resources sit idle between acquisitions, can be dearly expensive for businesses.
For serial acquirers, you may have a good bench strength of integration resources but most of the time, either they have some of their integration resources involved in non-M&A, operational activities or, there is so much work that internal teams cannot handle them any longer.
Or specific integrations have specific nuances for which they may not have internal expertise.
TOOLS AND TECHNICS
Just as personnel skills are important so are the different tools and techniques that get used during an M&A integration. Serial acquirers do have a fair number of tools and techniques at their disposal but opportunistic acquirers face issues with these tools.
Whether creating workstream charters, risk registers, integration project plan, cultural integration checklist, communication plans, announcement templates and budget management tools are just a few examples of these.
On top of that, there are various strategic frameworks that get used during an M&A integration. Ability to use these relevant frameworks in specific scenarios need a certain level of adroitness and contextual understanding that may not be very prevalent within an organization. Usage of these strategic framework can provide huge coherence to the project in otherwise, a complex undertaking.
As M&A is a high visibility activity, it also attracts a fair amount of politicking and pushing individual agendas. It is also, fraught with fiefdom and turf protection. Internal resources find it extremely difficult to navigate these political minefields. Being able to run M&A integration without any interferences or to keep neutrality is a big concern.
External resources can be brought in to bring that amount of neutrality. As they do not have any alliances or legacy baggage, they are better positioned to manage the situation.
Of course, it does not mean that external resources can remain untouched by organizational politics. But it potentially gives them a better chance to succeed.
Overall, organizations must evaluate their skills and expertise position vis-à-vis ability to conduct an M&A integration. The future is going to be volatile, uncertain, complex, and ambiguous (VUCA) and most organizations will be under huge cost pressures.
Therefore, it is prudent to acknowledge the future, identify the gaps within your organization and then create a talent strategy to manage your future M&A integrations.
This article is written by Anirvan Sen.
It is edited and keyword optimized by Blanca Monni.