PMI – An Insider’s Guide – Part 2: What to do When You’re Asked to Assist in a Potential Acquisition – Between Signed and Closed Phase
Your day starts with headlines screaming across the Internet – your company has acquired a particular entity (“Target”). The office is buzzing with the news and potential impacts – what does this mean for my role now and in the future, and how much more work am I going to have to take on? More often than not, the acquirer’s legal team will be tapped to coordinate the planning for post-merger integration and implementation. So, what do you do when the first email of the day is from your boss informing you that you’ve been asked to manage the legal needs of the Target? Here are three points to bear in mind to begin the process of that most nebulous of goals: a successful integration after a headline grabbing acquisition.
Even if you weren’t tapped to assist at the due diligence phase (see my first article here: http://www.jdsupra.com/legalnews/pmi-an-insider-s-guide-what-to-do-when-28869), you can still make an impact and create the foundation for a successful transition, here’s how:
- Data Gather: Learn as much as you can, as fast as you can, about this transaction. This will mean getting a copy of the final due diligence memo and any related or collateral materials that were prepared by the working team to help you better understand the acquisition purpose, the proposed business plan, critical milestones, and where the legal function fits in. Take the time to reach out to the points of contact from the various functional areas involved in the deal, especially your Tax, HR, Finance, Facilities, Marketing, and IT teams to learn their perspective on the deal and what are their central issues. Bear in mind that in an acquisition, legal issues are only one facet, and often not the most important facet, of the deal. You will need to understand the challenges each of these areas are dealing with. Those challenges and issues will often cross-over into Legal. Forging strong internal relationships across functional teams will enable you to issue spot sooner and work with a team of subject matter experts to remediate issues quickly. These cross-function colleagues can become your lifeline to making the deal an ultimate success as everyone is incented to want a deal they have been working on for months to work out.
- Plan for Day One and Execute on that Plan: If you have been given the task to plan for legal support for the Target, start with the basics and work your way out to the more complex. Don’t forget that one of the biggest pressure points you will face is ensuring that legal support (often measured in how quickly legal requests are responded to by the appointed legal team) flows as seamlessly the day after closing (when you and your company are now fully legally in charge of the Target) as it did the day before closing (when you weren’t in charge yet of the Target). Some of these suggestions may appear obvious points but in the chaos of integration planning, even the obvious can get lost in the dust up, so keep a checklist with the following questions:
- What contracting entities will be used after close?
- Who has signature authority for those entities?
- If there are to be changes to entities, make sure you are liaising with your tax and finance teams so entity changes are coordinated and you act in lock step with your SME colleagues in the other functional areas,
- Are there any existing Target legal resources who will remain and assist and if so, try to spend time with them understanding their roles today, how the work flows, expectations about turn-around times;
- Make sure there is a plan, even for the short term, to ensure legal support requests are responded to quickly after close.
- Overall evincing a sense of calm and a good faith effort to control the chaos will help those around you be less afraid of what the future may hold and focus on the work at hand on a day-to-day basis, while the larger strategy gets sorted out.
- Be Nimble: The best laid plans can be turned on their head as new information comes to light between sign and close. What appeared to be a manageable number of client and vendor contracts is now several times larger, or the service that was thought to be unregulated is actually regulated and the required license or approval was never obtained, or the business leaders told the Target “nothing will change after you’re acquired” when the exact opposite is actually what’s happening. The largest challenge in planning for and ultimately implementing a post-merger acquisition strategy is the general day-to-day chaos that everyone must learn to be comfortable with. If you can become comfortable with lightly controlled chaos, you will have a better chance of succeeding and not pulling all of your hair out in the process. If you continue to stay connected to your SME contacts in each functional area (having regular conference calls or in person meetings is the best way to do that), most likely a challenge you have in Legal is also one trickling into the other areas as well (Finance can’t recognize revenue they don’t know exists, Tax can’t move to wind down entities that still have people or contracts tied to them, etc.). Leverage these relationships to quickly identify and respond to the changing landscape and help each other creatively problem solve in a way that helps everyone. There is usually not just one way to solve a problem or address a crisis, so learning to be flexible and open in your approach will help you more easily and sanely shift course as needed during the planning and implementation phase of the integration.
Despite reports that most acquisitions fail, you can make a big difference in setting a foundation for success by following a few pointers. Make sure you take affirmative steps to understand as much as you can about the acquisition process and rationale for acquiring the Target, devise a realistic plan to ensure continuity of legal support during the initial transition, and go outside of your comfort zone to be as nimble as possible to adjust plans and address issues as they emerge when facts on the ground change.