PMI – An Insider’s Guide – Part 3: What to do When You’re Asked to Assist in a Potential Acquisition – Post-Integration Run Phase and the Wheels Have Come Off

Sep 14, 2017

This is the third in a series of three articles on post-merger integration, find the other two articles here and here.

It’s been months since your company was all over the news with a splashy acquisition and the fanfare has died down a bit.  There are rumors, quietly at first, but then persistently louder, that things aren’t going so well with the transition: the new employees are unhappy, the promised revenue isn’t flowing, and the sought-after efficiencies appear elusive.  Then the dreaded phone call comes from your manager: we need you to help fix what’s happening here.  In other words, we need you to follow the parade with a shovel.

Even if you weren’t tapped to assist with the acquisition of the target entity (“Target”) and weren’t included in the planning and execution of integration, it’s never too late to dive in and make a difference when things don’t seem to be working.  Here are three steps to take to try to right the ship:

  1. What Happened?  When an integration goes awry, everyone involved has an explanation for why.  If possible, spend time with the stakeholders to understand the strategy for the initial plan to purchase the Target, and try to discern if over time the rationale and strategy has changed (and if the planning was ever aligned to the changes); if Target legal team members came over in the acquisition, their perspective will be invaluable about how they operated previously and what best practices can be carried over that may have been missed earlier.  Even if the planning and execution of the integration ended up as a misfire, it still makes sense to understand what the initial plan was (if there was a plan) and what information the plan was based on.  Gather as much information as possible about the transaction, what the initial planning was, and listen to the participants about what the vision was.  As recommended in previous articles, reviewing the due diligence memo and any presentation decks about the acquisition will provide insights that will still be pertinent down the road.  Remember to speak with your counterparts in other functional areas involved in integration as more often than not challenges are interrelated and may cross over the various functional areas – you are likely to gain insights on how to address issues and tap into institutional knowledge by keeping your perspective broader than just the legal group.
  1. Don’t Ignore Culture.  Everyone is familiar with the quote attributed to Peter Drucker that “culture eats strategy for breakfast,” but what does this mean in the practical reality of one business acquiring another?  If the business decision has been made to acquire the Target entity, all too often companies will ignore or soft pedal the cultural differences between the two companies because other more obviously economic synergies exist.  At whatever point in the acquisition cycle you become engaged to assist with legal support, take the time to try to understand the Target entity and how its industry, size, location, and core values shape its culture.   Often, there is a tension between how a smaller Target entity ran in an entrepreneurial, free-wheeling fashion, fostering an environment where process was less important than creativity, and the larger acquiring company where strong adherence to process, policy, and protocol have led to disciplined execution and strong customer focus.  Often lawyers trying to manage or create a legal support model in these circumstances must balance Target’s expedient practices with established process.  Being able to create interim solutions that keep the work flowing, the revenue coming in, and customers satisfied will help offset the inherent challenges many people face when an acquisition and the inevitable integration displaces the regular work flow and cadence of the Target entity.  It’s important to be sensitive to how difficult adjusting may be to the Target’s workforce and their changing roles/responsibilities.   By listening to your new colleagues about what was working before but isn’t now, you will be able to come up with solutions to keep the work flowing while leveraging the best practices.  Ultimately, the best laid plans and the most articulate strategy will fall in the face of resistance from your new colleagues if they feel their culture and contributions are being ignored in the new model.
  1. Triage to Steady State.  Depending on what has gone awry with the integration, focus your efforts on standing up a day-to-day support model that will both engage the Target’s legal resources (if any), as well as leverage the core knowledge of your own legal team.   This may also be the time to engage the assistance of outside counsel to provide a fresh perspective on a legal support model and an unbiased view of the challenges.  Also by using outside counsel who are either already familiar with your own business and legal team or have extensive in-house experience, you can bring in an already proven source of support to help manage the workflow.  Trusted outside counsel also play a role in helping to disseminate information related to sensitive issues when the internal legal leads may need to be shielded from having to deliver more difficult messages.   Outside counsel will also be able to share best practices for legal support models that may be key to getting over the hurdle of interim support.  Often leadership may not know their plans for the Target entity in terms of running it separately or immediately integrating operations into existing functions or some variation.

Even in the scenario where everything seems to have gone wrong, there are still steps that can be taken to set the delivery of legal services to the Target entity on a firmer path.  High level strategic debriefings and Monday morning quarterbacking will go on for months trying to determine if the Target should have been acquired in the first place.  But you can make a difference now in the delivery of legal services by keeping an open mind to try to understand what happened in the first place, and to do that from as many perspectives as possible while remaining uncompromisingly critical, becoming a student of your Target’s culture and values, and making tactical decisions to get the legal function meeting deadlines and keeping up with the flow of documents.  Using trusted outside counsel at any stage of the acquisition to plan for, implement and triage integration can provide an outside perspective and legitimacy and ultimately turn a perceived failure into a win.

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