Once you have closed on the acquisition there are several steps you need to take to ensure success. Most of these steps need to be done quickly after closing to increase your chances of a successful acquisition.
- Make headcount reductions quickly. Don't cut off one finger at a time. Take a long look at who you really need to keep and do one layoff, not several. If you do several everyone will be looking for a new job as they won't be sure who is next.
- Give raises to those employees you keep. Nothing says, "Your job is secure" like a raise. From the savings you get from the layoff spread some around to the people you want to keep.
- Increase selected benefits. Just like a raise, an increase in benefits also helps morale. Evaluate the benefit package and sometimes even the addition of an inexpensive benefit like vision care helps improve morale after a layoff.
- Communicate with customers immediately. You should have a letter ready to go to all of the acquired company's customers on the day you close the deal. You need to stomp out rumors quickly. Nature abhors a vacuum and in the absence of communication from you, your competitors and the rumor mill will put a negative spin on the deal.
- Meet key customers quickly. Pareto's Law (aka the 80/20 rule) exists in all industries. See as many of the 20% of the customers who make up 80% of the acquired companies revenues in person as soon as possible after the closing. A personal visit means a lot to most customers and will allay most of their concerns.
- Meet with key suppliers right after you meet with key customers. In most businesses suppliers are almost as important as customers. After buying a company you can't afford to lose sales due to the loss of a key supplier. Meet with top suppliers ASAP and share your vision and plans so they know what your goals are for the business.
- Automate everything that you can. One of my mentors told me that computers don't get pregnant, they don't ask for raises, and they don't show up for work drunk. Anything that you can computerize will save you money in the long haul.
- Outsource that which you can't automate. Other than customer facing people, look for everything that you can outsource such as payroll, human resources, delivery, billing, IT, web hosting, e-mail hosting, and anything else you can think of. This frees you to concentrate on the things that generate sales and profits.
- Get rid of people with bad attitudes. Every company I have ever acquired has had some employees that immediately started complaining about any and all changes. The former owners (who they also used to complain about) suddenly become perfect in their eyes. Get rid of these people the way you would get rid of a cancer. Terminate them immediately. That will also make other complainers think twice before they start stirring up trouble.
- Make other changes slowly. Once you have made the above changes (and make them quickly) don't make other changes to the business for about a year. You may be surprised you don't have the market cornered on good ideas. Make a show of publicly adopting some ideas from the prior owners so that the acquired employees see that you are open minded. Most of all, never forget that the only people that like change are wet babies. Recognize that change is traumatic for most people so after the initial changes, minimize other changes for about a year unless absolutely critical.
This is the final part in a three part series Sobeck wrote about mergers and acquisitions. Part I focused on negotiating the deal and part II was about financing the deal. Jim Sobeck is president of New South Construction Supply, West Columbia, S.C. This article originally was posted on Sobeck's Biz 101 blog. Copyright 2011 by Jim Sobeck. All rights reserved. This information may be reproduced as long as full credit is given to the author