The smart way to merge operations for post-acquisition success

What is operational integration?

Operational integration refers to the process of combining the operations of two businesses who are coming together after a merger or acquisition. Even companies that appear very similar on the surface can operate quite differently once you look under the hood, making this alignment an important part of the integration process.

“Every company has its own unique way of doing things, whether we think about culture, systems, data management, processes and how people work,” illustrates Josh Ramsbottom, a Senior Business Advisor with BDC Advisory Services. “The goal of operational integration is to quickly bring all these elements in line so the new organization can function effectively as one. Doing so also reduces the risk for owners, customers and suppliers.”

How does operational integration differ from strategic integration?

The difference comes down to a matter of scope. Strategic integration focuses on the broader objectives of the merger, while operational integration refers to the work required to align the combined companies’ day-to-day operations.

Strategic integration

This level of integration involves ensuring the transaction delivers its intended outcomes, including:

• growth
• market expansion
• new capabilities
• cost synergies 

Strategic integration addresses questions such as:

• how the combined company creates value
• how business units are positioned
• how the organization supports its long-term strategy

Operational integration

In contrast, this level of integration focuses on a more tactical question: how the combined organization will actually run on a daily basis. By addressing these operational details, companies can help ensure the new organization and the people within them work as smoothly as possible through the changes that are taking place.

What are the key areas of operational integration?

Operational integration generally focuses on three core areas: people, processes and systems. Together, these elements determine how the new organization functions on a daily basis.

1. People

A critical part of operational integration comes down to people. More specifically, this area of integration involves clarifying roles and responsibilities within the new organization. It means helping teams that may have never worked together align around common goals and performance indicators. 

To achieve this objective, business leaders will often need to rethink their past organizational structure and determine, with the addition of the new companies’ people and departments, what they need for the future. For example, if both companies had similar leadership roles, such as two chief operating officers, the new organization may need to redefine responsibilities or consolidate positions. 

Companies may also need to address differences in skills and capabilities across the two workforces. They might have to set new expectations, update performance standards and work to reshape the culture of the combined organization to get the operational advantages they expect from the acquisition or merger. 

According to Ramsbottom, one of the key ingredients of success when it comes to this area of integration is change management. “Communication is key. We need to explain often what we are doing, why, and show employees what’s in it for them. It’s a crucial part of operational integration.” 

Ramsbottom goes on to explain that companies often underestimate the need to reinforce key messages consistently and to clearly articulate what new roles and reporting structures mean. “Operational integrations can succeed or fail based on how people embrace or reject change, so it’s better to over plan and overcommunicate rather than fall short on either.”

2. Processes

Business processes refer to the standardized ways a company carries out its day-to-day activities. In an operational integration, processes are a key area to combine as they leverage the operational benefits owners were looking for when they went ahead with the acquisition or merger. 

“The new company will need to review and align its standard operating procedures, workflows and internal controls to ensure the combined organization operates consistently and efficiently,” explains Devesh Dwivedi, Lead Business Advisor with BDC Advisory Services.

Leaders should identify how key activities are currently performed in each company and determine the best approach going forward. This can include:

• clarifying approval limits
• updating checklists
• defining business requirements for daily operations
• establishing clear expectations for how work should be completed 

Even seemingly simple questions, such as who manages inventory or how it is allocated, can have a significant impact on performance if they are not addressed early in the integration process. By documenting and harmonizing processes, companies can reduce duplication, minimize confusion and create a consistent operating model that supports the new organization’s objectives.

3. Systems

Operations are not conducted in a vacuum. They depend on a layered infrastructure of technologies, from software systems to production lines. To keep the new company functioning as a single, integrated organization, business leaders need to think carefully about how these systems will be aligned, connected or consolidated.

This often includes:

• enterprise software
• financial systems
• customer relationship management tools
• data platforms
• operational technologies

In many cases, the two companies will have different systems performing similar functions, which can create duplication, data inconsistencies or inefficiencies if not addressed. 

Leaders must decide whether to standardize on one platform, integrate selected tools or implement new systems that better support the combined business.

Companies need to assess their existing systems and think about how they enable data access, sharing and reporting. When done correctly, investing the time to close gaps, define workflows and implement system modules or functionalities can pay off in the long term. Conversely, forcing systems to work together by resorting to short-term “band-aids” will cost more in the long run. 

Of the three areas, which one poses the greatest challenge? “Business owners often think that systems are the most difficult and important area to integrate. Usually, this is because of their up-front financial costs. In reality, the number one challenge is people,” says Ramsbottom. “The reason is that without alignment among your people, even the best-integrated systems and processes will fall short. If your team doesn’t buy in, the integration is unlikely to succeed.”

What key steps should businesses take to integrate their operations?

While every transaction is different, successful operational integration typically follows a structured and deliberate approach. The key is to begin early, decide upon objectives and move forward with a clear plan. Here are the key steps to integrate operations after a merger.

1. Begin the groundwork early

Much of the work should happen before the merger closes. Leaders should review the two organizations’ people, processes and systems to identify strengths, weaknesses and overlaps. An impartial assessment can be especially valuable, as an external perspective helps reduce bias and ensures key risks are not overlooked. 

“At BDC, for instance, we have worked on a number of integrations in different sectors. We also built an integration playbook,” says Dwivedi. “As a result, we are in a good position to anticipate and help you overcome the challenges you may face during your merger.”

2. Decide on the depth of integration

Not all mergers require the same level of integration. In some cases, companies may choose to keep certain elements separate for strategic, legal, geographic or brand-related reasons. In these situations, business leaders might only combine some back-office functions, using shared services to boost efficiency and consistency. In other cases, a deeper integration is needed. Deciding on the right level of integration is important because it shapes your whole plan.

3. Define objectives and develop a high-level plan

Once the scope is clear, executive leaders should align on the desired outcomes of the integration. What does success look like? What synergies, efficiencies or improvements are expected? From there, teams can develop a high-level roadmap that outlines priorities, timelines and responsibilities.

4. Communicate early and consistently

Communication is essential throughout the process. Employees, customers and other stakeholders need clarity on what is changing, why it is changing and how it may affect them. Clear communication helps reduce uncertainty and builds trust during a period of transition.

5. Implement, monitor and adjust

Operational integration is not a one-time project but an iterative process. Many organizations follow a continuous improvement cycle, called PDCA (plan, do, check, act). Essentially, it involves to plan, implement, review and adjust. By tracking progress, evaluating results and refining the approach as needed, leaders can reinforce what works and pivot where necessary.

How long does it take to integrate operations?

Operational integrations should be completed relatively quickly. Dwivedi suggests structuring the process around a 100-day plan.

“It is important to have the integration time-bound,” he says. “You do not want to be talking about integration endlessly. You want to quickly establish a sense of unity.”

Although some tasks may in reality take more than 100 days, an operational integration should be mostly done within six months, and no more than eight months in the worst-case scenario.

According to Dwivedi: “Companies that take longer than this are typically never able to realize the expected synergies and value of the integration.”

Next step

Learn what it takes to make a successful acquisition by downloading BDC’s free guide on Buying a Business in Canada.