Post-Purchase Integration Plans: a How To for Buyers
Wording by Emily Morris
The numbers are staggering. In his recent book, The Exit Strategy Handbook, Jerry Mills, founder of B2B CFO®, the nation’s largest CFO consulting firm, outlined the potential impact of the wave of businesses that will most likely become available for sale as Baby Boomers plan for retirement. According to the book, an average of 378,000 Baby Boomer-owned businesses (500 or fewer employees), will be put on the market every year between now and the year 2029. This compares to approximately 24,000 per year over the past six years.
Needless to say, the Partners at B2B CFO® strongly believe that the market for acquiring a small to mid-sized business over the next fifteen or so years will be defined as a strong buyer’s market.
“I personally believe the Post-Purchase Integration Plan is what makes or breaks your acquisition,” John Lychos, a B2B CFO® Partner and the Michigan Region Leader for the company said when asked about the importance of buyers putting a plan in place.
“If you’re closing the deal on December 31st, you better know exactly what you’re doing come the morning of January 1st. If you don’t, you’re already failing,” Lychos said. “All too often, it’s the thrill of the deal and the due diligence process, followed by price negations and a close that sidetrack buyers from developing a sound post-purchase integration process.”
This means that not only is having a Post-Purchase Integration Plan (PPIP) key in successfully acquiring a new company, but having it ready for execution before the deal is closed is a critical factor in determining the company’s future success.
If you are putting together a PPIP, then you have already completed your due diligence as a buyer: you’ve reviewed all necessary company documentation and procedures (which could take months or even years), and as a result, you have come to the conclusion that you want to buy this company. Great. Now what? Now you need to execute a plan that will ensure that your acquisition is successful and that it will meet your strategic objectives going forward.
Luckily, experienced B2B CFOs like John understand the ins and outs of creating such a plan. After chatting with John about his thoughts on PPIPs, I had a clear picture as to how a buyer may go about developing a solid plan. Here are some keys to that picture:
1) Have a successful transition team in place OR a solid plan as to how you are going to put a successful staff in place efficiently.
- Whether you’re keeping the current staff, letting people go and hiring new employees, or both, you should have an efficient and intelligent staff in place to continue running the business.
- By Day 1, you should know who you are keeping and who you are letting go; who are the “A” players and who are not. The seller should provide you with employee reviews and major accomplishments backed by key performance statistics. “Keeping the best performers is a key to executing the integration plan successfully,” Lychos said.
2) Take control of the cash flow immediately.
- As the new owner, you should be in control of the cash accounts (if acquired), accounts receivable, and accounts payable as soon as the deal is signed. Allowing the acquired company to continue to oversee their cash flow is a common cause of problems for new buyers. Lychos advocates taking control of the cash flow as a way of clearly signaling the change in control.
3) Develop a clear company vision.
- A well-thought-out Post-Purchase Integration Plan includes a concise company mission and a clear plan for the short-term. Everyone in both organizations (existing and acquired) will want to know what the transition means for them. Take the time to spell out your business goals for this acquisition before you sign the deal. And further, develop a strategy for reaching those goals.
- When you finally do purchase a company, issue your mission and vision to all employees (new and existing) and hold a meeting in which you can discuss your ideas and strategies. This will show your strength as a leader as well as buoy the spirits of employees, some of which may feel nervous or anxious about the change in ownership.
4) Shortly after the acquisition, refresh your strategic plan, re-assessing the resources and expertise needed to work in this market. You will learn quite a bit about the business within the first month or two, and this knowledge can help shape your future strategies and goals.
- If you’re expanding into a new market, you need to make sure you are building the infrastructure to be able to successfully profit from this expansion.
- If you’re “tucking-in” or “rolling up” the acquired company, go back to your strategic plan and revisit the reasons for targeting this acquisition. Then, use the new knowledge you’ve acquired to shape your tactics accordingly.
In the end, there is no simple way to prepare for an acquisition. B2BCFO® partners like John Lychos can help you enhance the value of your current business, successfully sell it to a trusted buyer, or strategically acquire and grow a new company.