Post-Closing formalities for M&A transactions

Types of Post M&A Integration

1.????Absorption. This is the scenario in which the buyer completely absorbs the seller and all the processes, organisations, and procedures, such that there would be no trace left. It would be as if the seller never existed.?

2.????Symbiosis. There is equal give and take between the buyer and the seller. They work in harmony and have a symbiotic, mutually dependent relationship. In practice, this type of integration is only performed for a few departments or areas depending on the needs of the merger or acquisition.

3.????Preservation. The seller company mostly remains the same – it may retain its name, most of its autonomy and employees, etc. except with few changes in its financial structure and information-sharing processes.

4.????Holding. This type of integration is observed when the buyer becomes the owner of the seller post the M&A but apart from this, there are no other integration efforts – not even to the extent seen in the Preservation method.

?Who are the important change enforcers for post M&A compliance?

1.????Top Management and Shareholders

The top management is the part of the organization which has the most access to information. They are the ones calling the shots. Thus, they will be first to communicate to the rest of the organization that the M&A deal is taking place. The way in which they choose to disclose this is very important. It has the effect of getting the entire organization on board or alienating them which creates feelings of resentment and resistance to change.

2.????The Due Diligence to Post-Integration Team

If you take a look at the best practices of post-M&A integration and some examples of successful M&As analyzed in Part E, one of the takebacks is that the members of the due diligence team are best-suited to be part of the post-integration M&A team as well. This is because they already know all the key aspects of the deal.

Bringing in new people at the end, during the most critical part of the deal, has proven to be sheer madness in the past. You will be redoing work and wasting resources during a time-sensitive process on redundant activities.

If you use the same people for both due diligence and post-M&A integration, you will be able to maintain stability and continuity from start to finish. Remember: every detail counts. During the chaotic, hectic and busy moments that make up the closing and integration span, you do not want your integration team to miss out on anything.

If you have a new, different team for integration, the due diligence team will have to hand over all the data to them – offline as well as online data including documents, plans, notes, drawings.

What if something gets lost during the transfer?

What about any undocumented bits of information?

Clearly, there are some things that only the team handling knows best.

Even the most efficient handover will suffer from these shortcomings.

Even if we assume that all the data has been successfully transferred – is there a guarantee that the team will really go over every document, note and scrap of paper? Even if they have the inclination, will they have the time, energy or resources to do so?

The most natural scenario is that they will be hustling to get all the work done by the deadlines. Shoving paperwork at them – that needs to be read and made sense of – will seem like an added burden.

Therefore, the intelligent and logical way out is to have your due diligence team take over integration as well.

This style of integration also ensures that the team maintains the same sync, pace and tempo of work and the work moves along smoothly.

There are great opportunities to capture synergies within the first 120 days of integration, which makes this a key M&A integration strategy.

3.?????Human Resources

Although companies have now understood the importance of the “human element” of M&A and how it can make or break the M&A during integration, they still miss out because they fail to get it right during implementation.

The problem is that the employees and clients of the company – indeed, all the stakeholders make up this “human element” in the company and their interests and satisfaction need to be safeguarded during integration.

If they are dissatisfied with the new corporate culture, way of business or the general management of the company in the early days, they will leave the company. Especially because competitors always gather around the new entity, looking for an opportunity to interfere with synergies.

Keeping these factors in mind, you need to have integration checklists at the ready and discuss communicate and inform all your management, at all levels – on day one itself – to prime the employees and client regarding the new organizational structure, culture, positions, benefits and the vision for the future of the company.

Thus, the Human Resources department of the company has a major role to play here, to take care of the “human” elements of integration.

4.????Hire A Change Management Professional

The HR team can accomplish quite a lot. But to achieve true success in integration, you will need a change management professional, which is the best practice in M&A for handling change in any organization.

The benefits of having such a professional on your integration team are many:

·?????? the buyer gains valuable information about the target which help to maximize the value gained out of the deal; and

·??????the employees in the target feel cared for and secure enough to reveal facts that are unknown to you i.e., secrets are revealed. You may find out new information regarding the running of the company that even the leadership may not know of.

All of these benefits help you get rid of potential costs and problems in the future.?

However, keep one thing in mind – when you select a leader for the integration team, ask for recommendations from the members. This will take care of leadership conflicts within the team. Strong management practices and techniques always come from top to down in an organization.

5.????Make a post-M&A integration plan

Planning is the first step in business management. If you are part of the top management in a company or have studied business management, you know the importance of planning. So why not apply this tool to post M&A integration as well?

Figure out how you will align your resources, corporate culture, and bring your employees on board to achieve your M&A synergies and put it down on paper.

Because (s)he who fails to plan...... is planning to fail.......

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This is sixteenth article in the series on #mergersandacquisitions by our student researchers Swasti Patoria, Annapurna Prabhu, Astha Agarwal, Aayomi Sharma, Amrutha Alapati and Aradhya Singh, students of Jindal Global Law School (JGLS) Symbiosis Law School, Pune and Symbiosis Law School, NOIDA

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