After buying a business, what is the next step?
4 minutes read
Buying a business is a huge step in the life of an entrepreneur. On top of managing your existing company, you now need to integrate a new one, while ensuring that both businesses operate without disruptions.
The first months after the acquisition are crucial for the successful integration of the new business. You will need an action-plan to avoid missing essential steps.
Follow this must-do list during the first few months after an acquisition.
1. Establish a post-merger integration team
One of the first things you’ll want to do, maybe even before closing the deal, is identify a core team of leaders from both companies to lead the integration process.
“Very rapidly you want to figure out who you keep on board, who are your champions and make sure you settle them down so they can be part of the process,” says Patrick Hagarty, Team Lead, Solutions Development, High Impact Firms at BDC.
The team should be responsible for building an integration blueprint and executing on that plan to achieve operational objectives.
2. Develop a target operating model
Performing a function-by-function assessment of what needs to be integrated and how to do it is another key step. Hagarty says this will help you focus on the most critical elements of the process for the first 100 days.
In a situation where two companies are looking to integrate their accounting systems, for instance, one company might be using a basic accounting module, while the other uses a fully developed ERP system. Management has to decide what system to use and who gets to lead the integration. The team also needs to understand the impact of those decisions on other departments in the business.
“All of that happens under a clear understanding of what’s the operating model that we are trying to envision,” Hagarty says. “What’s the end state? How’s it going to look?”
3. Communicate the plan to key stakeholders
A change of ownership is a nervous time for employees. Rapidly designing your new organizational structure and communicating your vision for the company at an all hands meeting will ease the transition and lower uncertainty.
“Designing the organizational structure and communicating that plan quickly to your champion people will help you retain key team members,” Hagarty says. “Change management and communicating to people about what’s going on is a critical factor of success.”
The goal of your communications should be to reduce stress for employees that come from the unknown. People need to hear the same thing together so that the message doesn’t get misinterpreted among new and existing employees. If your company operates in multiple locations, consider a virtual meeting, through video-call or web-conferencing.
In the mind of many employees, mergers and acquisitions translate into layoffs. Use this first meeting as an opportunity to put people at ease and reduce their fears. Talk about who you are and what your vision is for the business. But don’t promise more than you can deliver.
4. Introduce yourself to customers and suppliers
A change in ownership might be seen by competitors as a sign of weakness. You should think carefully about how you want to introduce yourself to customers and suppliers.
You should make a special effort to protect your relationship with key clients and retain them as customers. If you’re planning changes, you should make sure to call and meet them as soon as possible.
In an ideal situation, the previous owner will help smooth the way during the transition period by introducing you to external partners.
5. Focus on your strategy for the business
When buying an established business, you are also buying the previous owner’s way of doing things. It doesn’t necessarily mean it’s the right or the best way of doing things just because someone did it that way for 50 years.
Consider how you want to run your new business when building your action plan. How will the changes you want to make be reflected in the organizational structure? Will company divisions remain the same? Will you streamline lines of reporting? Make sure you communicate these changes and clarify what type of company culture you are trying to build.
6. Leave your door open
Ultimately, buying a new business and integrating it with your existing one is a complex exercise in change management. Don’t be surprised if people still have questions after a few months, or are resisting change. Your best ally to fight uncertainty and win people’s trust is to communicate often and ensure you’re being transparent, open and approachable.