The Importance of Post-Merger Integration Checklists

February 19, 2019

Your company has identified another company it wants to acquire. The letter of intent has been executed, and your team is granted exclusive access to its information. Extensive kicking of the tires takes place, including reviewing legal contracts, understanding key personnel, and all other manner of due diligence activities. During this process, you look for issues that validate–or invalidate–the transaction. Everyone is in high gear, focused on getting the deal done. You arrive at an agreement, followed by a maelstrom of documents being finalized and signed. Money changes hands, and the acquisition is, at long last, consummated.

Now what?

There can be hundreds of tasks and action items – some mundane, others critical – that need to take place during the period of the acquiring company taking control of the acquired organization and throughout the integration process. If they are executed well, there’s a much higher chance of the acquisition being successful. If they are not, things…or many things will come back to bite you.

The most effective and efficient way to ensure everything that needs to happen does is quite simple: a checklist. Or rather, in this case, two: a Take Control Checklist and an Integration Checklist.

Setting a culture of competence and confidence out of the gate.

The sheer volume of simultaneous items that require action during this time of transition means the likelihood of some of them slipping through the cracks is quite high. The process of establishing a checklist forces those taking control and leading the integration to be systematic and mindful, and can often uncover tasks that may not have initially been thought of as needing attention. Something as practical as having keys cut or getting security badges to access the property is checklist-worthy, simply because they are seemingly mundane and therefore easy to forget. Ensuring the payroll account is funded so employees get paid on time is more critical, but also easily taken for granted.

When any misstep happens, even oversight of low-value tasks, leaders will come across as disorganized to both the acquiring and the acquired company. Perceptions matter in the early days of these kinds of transactions. Employee’s confidence may be fragile, there can even be a certain amount of skepticism about the acquisition, and there is a short window of opportunity to establish credibility with them.

 What belongs on the checklist.

For both a Take Control Checklist and an Integration Checklist, every functional area within the new entity should be represented and have appropriate action items on the checklists, along with the associated people who are responsible for acting on those items. It’s important to consider action items for each of the various organizational functions involved with and impacted by the acquisition: finance, accounting, regulatory, human resources, real estate, operations, marketing sales, IT, and all the others.

In addition to the above categories, there should be broader change management categories added to the lists, including communications (internal and external), the organization (contracts with critical people, changing organizational structure, compensation systems, etc.), and the post-merger management integration process, to name a few. While these are not functional in nature, they should be included as in any other large-scale change program.

A quick note about checklist resistance.

Sometimes these kinds of practical integration tools can raise employees’ hackles. Organizations are complex, full of different personalities, so sometimes there are those who don’t like the use of checklists. They resist them because they don’t want to be accountable to a list of any kind or to the people making sure items on the checklist are being carried out. However, the reality is, checklists empower employee success as much as organizational success. They do this by creating a roadmap of tasks that need doing, and a certain amount of planning and accountability can make sure that happens. It’s in our nature to be overly optimistic about what we can do, and sometimes we take on more work than can possibly be done. Checklists have the power to keep us focused and realistic.

Checklists can play a key role in making sure the integration process is considered and also help reduce the number of failures. They can organize actions into some logical order and put into place a systematic approach that helps us overcome the limits of our memories. Organizations are led by humans, after all. We are imperfect beings; we will make mistakes; we will overlook things. And while the benefits of using checklists make perfectly good sense, you’d be surprised how uncommon common sense is. Not because management teams lack sense, rather they are so busy with executing the deal, the “now what” phase is often put on the back burner. It has more to do with bandwidth. Acquisitions can be a beast, especially if leaders haven’t been through one before. It will be impossible to have thought through all the necessary actions that need handling. This is one of the reasons why outside assistance is vital: the management team needs surge protection. Adding temporary management capacity allows the leadership team to continue to run the business, while outside support helps with merger-related tasks.

You can read more about making mergers work in this HighPoint Associates Insights article

 Take Action Checklist

☐ Share this article with your M&A and PMI (post-merger integration) teams. When everyone knows why you need checklists it makes everything easier.

☐ Direct your M&A team to produce a Deal Closing Checklist. You are accountable for executing a successful deal – it’s always a good idea to have your team run point (even though your bankers and lawyers will likely have their own lists).

☐ Direct the M&A and PMI teams to collaboratively produce a Take Control Checklist. Having both teams involved helps to make sure no balls get dropped in the hand-off.

☐ Direct the PMI team produce a complete cross-functional Merger Integration Checklist. Get every function involved and make sure you have a complete list.

☐ Require your M&A team review and sign-off on the Merger Integration Checklist. The M&A team may have learned things during the due diligence that need to be managed during the integration. Having them sign off helps reduce this risk.

☐ Manage checklist resistance by sharing this article and asking naysayers to propose a better alternative that ensures everything that needs to get done does – even the little things

Alex Nesbitt is a Senior Advisor at HighPoint Associates, a strategy consulting firm headquartered in El Segundo, CA. Alex has 30+ years of management consulting experience and a strong track record of partnering with CEOs to tackle issues related to strategy, organization, senior team management, operational effectiveness, and performance improvement.