Lorraine McGregor Interviewed by Business Review Canada on Merger Integration

In the July 2010 edition of online innovator Business Review Canada, Lorraine Rieger McGregor provides insights into ways to keep the value of an acquisition through the integration.

Cross-Border Integration Irritants: You Change First

Case Study Project Description

A Canadian retailer was bought by an American chain store in their first cross-border acquisition. Several years post acquisition, different policies, procedures and laws, combined with the parent company’s change in management and centralizing of operations, alienated the Canadian management team. The US company did not seem to understand that Canadian accounting was different as was the expectation of an apology when payroll didn’t take the differences in law into account. Tempers flared often and the Canadian team would give the US management lip service.

They were not working well as a team: everyone ran their own department and store and did their own thing. Conflicts also existed between team members as to how to run things, how to grow and how to work with the American parent.

Project Problem

To be seen as a division ready to take on future growth – and not be left behind – the management team needed to learn how to collaborate through change and conflict, deal with the American parent’s way of operating, and influence change with the US parent through communication rather than resistance. The Canadian company retained us to help them with making these changes, knowing that the US parent would not be participating in the process. Was it possible for one side in a conflict to do all the changing and achieve any better result?

Solution

First, the leadership team had to be willing to stop viewing the parent company and its managers as the bad guys. This perspective ensured they felt powerless to get the attention they wanted to develop their own strategies.

Next, the team had to learn how to set their own vision and then sell it up the ladder as a team, not just rely on their leader to do it for them. We facilitated several events and team coaching sessions to set this new way of working in motion so that each member of the team contributed effectively.

After a year of working on the attitudes and methods they had been using to work with the US parent, the day came when the President would be in town along with the Vice President of Development. The Canadian management team met with us concerned that they would be shut down again. We reminded them of their vision to be trusted with an expansion strategy and that they could do this. We worked through their fears and concerns and anger and finally this group of ten managers agreed on their goal in the meeting with the US parent: they would welcome them, listen to them and make their request for the expansion.

Results

The mood changed immediately. As the US leaders walked into the room, the Canadian team rose and shook their hands. Camaraderie ensued and a good feeling filled the air. The Vice President looked around the room and smiled. He started with saying how impressed he was with everyone and their Canadian operations. He noted their change in attitude and what a joy it had become to work with them He wondered allowed what they wanted to do next. “Give me a plan, guys. Let’s do something up here!” Shock ran through the room. They got their goal and they had not had to ask.

After several meetings with the parent company the team was given permission to proceed with an expansion plan. They had not seen themselves as able to get this project off the ground before. Now they are the examples to other divisions about how to expand territories effectively.

With their differences resolved, communication with the parent company became informative and resourceful rather than rebellious and adversarial. Within 18 months, the management team emerged stronger, now the star performer in the store chain and opened their new store location.

Maximizing the Value Post Acquisition

Case Study Project Description

An industrial product supplier purchased a much smaller entrepreneurial distributor of products. It seemed like a good deal at the time. Due diligence revealed they had a few cash flow problems but the buyer had the resources to remedy that. They had a fine team of fabricators and had identified a package solution the market seemed to like so they were not just selling one off products. The deal was done.

Project Problem

The smaller company had moved into a new facility before the acquisition. The buyer didn’t need that space and immediately decided to split the company in two, sending the fabricators to the central facility and sellers and managers to a satellite office. Suddenly, two people quit. The smaller company had been vertically integrated so the sales people were also the product expediters. Now with their fabricators 30 miles away, they couldn’t tell if their sales orders were being processed. Anxiety rose, sales declined and more people quit. Management had not put in a new process to help the new people adjust to the system. The manufacturing plant had not arranged for an expediter on their end to communicate with the sales people. Information fell through the cracks. To top it off, the top three sales people were all close to retirement age. Who would they pass along their knowledge to?

Solution

Management knew there were cracks in their acquisition integration system. Marketing, sales, product definition, product management and people integration were left to chance. We were invited to assist Kibo Ventures to help them come up with a better template and method of integration as well as resolve the problems of the current acquisition.

We interviewed all concerned and started to see where the road blocks were in the entire operation from sales through to installation. Communication was blocked across many departments and conversations about process improvement did not happen due to chronic interpersonal issues. The sentiment was that people should ‘just get with the program’ or ‘duke it out’ to make things work. A feeling of bleakness and resistance to change was in the mindsets of new and old employees alike.

We developed a new organizational chart and strategy for how the company could become a lot more customer focused and resolve some of the interdepartmental issues. New roles were created to take responsibility for areas that had previously fallen through the cracks including succession planning, knowledge transfer, training, sales support, product management and market development.

Result

Included in this package of services was a pre and post integration due diligence road map. The map defined the areas where questions needed to be asked to make a good investment decision and then identify the questions and strategies needed to integrate a new acquisition in such a way as to maximize rather than erode the value. The map points to the areas where value erosion has the biggest potential and where to explore the impacts of pending decisions so that contingencies and alternatives could be developed. The company is now implementing several of the role changes and has halted acquisitions for the time being so that they will have a better foundation for the next company to be acquired.

How Do You Combine All the Products?

Case Study Project Description

A large innovator in the water business had been expanding through acquisitions on their product distribution side of the business. Now they wanted to increase their systems side with other acquisitions. But what should they buy and how should it be integrated?

Project Problem

Selling systems is a lot different than selling products. Products are short cycle items. People know what they need and they go and buy it. Systems solve bigger problems, come with a bigger price tag and have to be approved and selected by a variety of influencers. You can’t sell a system in the same way you would sell a product. Systems need a consultative selling approach that focuses on solving a problem for the customer. The problem is generally complex, involves several regulations, has installation issues, and takes time to build. The group that selects it is not necessarily the group that installs it, uses it or eventually owns it.

Solution

If you are in the market to add-on to the solutions side of the business, where do you put your focus in your acquisition selection? At the target market and only buy other system companies that sell to the same target market? At the technology and only buy complementary add-ons for that type of technology? Or perhaps at the ultimate end user of the technology? Our view is that the end user is the most important part of this equation. They have complex needs and those companies that can provide them an end to end solution that removes many of their perceived ‘hassles’ will get the contract.

Our solution was to train the management team in how to think like the customer to really understand their point of view, their pain, the hassles they experience and the work they have to do to successfully get a water system working to their satisfaction. Then we helped them survey the market place to determine: what competitors did; market trends; regulatory issues; and other uncontrollable variables that affect the sale of a water system.

Next they worked through all of this data and compared it to what they already offered and how they delivered it. They identified their internal process problems and installations to find ‘gaps’ that could cause customer frustration. Then they focused on the kind of systems that would best augment their current products to create a complete solution and identified the criterion most important in an acquisition.

Acquisition Case Studies

Ready to start acquiring companies? Already acquired a few and are wondering how to fit all the pieces together? Acquisitions are a great growth strategy. They also require a level of management and leadership as well as strategic thought that is much more complicated than running the original company.

What’s difficult? Making the right choices for your investments is only half the equation. Many companies erode the value they bought in the first three months by making decisions about how to integrate the company without first assessing impacts, checking assumptions and making a clear plan in consultation with the leaders of the acquired company. Just because your company is the buyer does not mean your methods are the best. Assimilation is not necessarily a smart business strategy.

Read on about how we’ve helped other companies learn to acquire and integrate companies successfully. Want to know your Acquisition IQ? Call 604-306-7707

Acquisition Case Studies

• How Do You Combine All the Products?
• Maximizing the Value Post Acquisition
• Cross Border Integration Irritants: You Change First