If you’re just now picking up this three-part mini-series on “getting the riskiest days right,” please be sure to catch on what we believe are the riskiest days in M&A and why: The Riskiest Day and Getting Announcement Day Right.
Now let’s talk about one of the most important ways to generate “mojo,” “cred” and “traction” for your integration, your leadership team and your company. If done right, Day 1 can accelerate alignment, start the synergy capture process and vastly improve your ability to achieve important integration milestones and objectives. If not? Hello, confusion, discord and value erosion!
There are lots of complex risks in play on Day 1, but far and away, the most damaging risks are usually internal. Perhaps more than any other day during integration, Day 1 can freeze and disrupt an organization like nothing else. Questions will abound from every corner of every corporate campus and literally wrap the organization around the axle before you can say “the deal is closed.”
Here are just a few things to be on the lookout for:
- “Why can’t I log onto your systems?”
- “Can I still decide the same issues I used to be able to?”
- “You have to get how many approvals for that?”
- “How should I answer the phone?”
"Day-1 can freeze and disrupt an organization like nothing else."
Unless you get Day 1 down to a fine art in your M&A capability model, you will likely continue to suffer more unpleasant surprises and disappointments than quick wins and early successes.
Don’t believe me? In our survey, The State of M&A Integration Effectiveness, we found that the organizations that consistently do well at Day 1 outperform those that do not by a big, fat margin when measured against a whole range of key business result measures. . You simply have to get Day 1 right.
First off, we advise folks to never, ever plan Day-1 events on the same day as the official legal close of the deal. There are too many last-minute issues that can, and routinely do, go wrong that can completely disrupt your careful Day-1 plans. More importantly, there’s too much strategic significance riding on Day 1 to allow any room for last-minute legal transactions or funding delays to affect what should be one of the key highlights of the entire integration process. The fact is that the best acquirers use Day 1 to strategically drive progress in selected, high-priority areas. What you do on this day will inevitably cast a long shadow both internally and externally on many other things to come.
Second, let’s cut ourselves some slack here. When we say Day 1, there are actually a series of events and actions that can and should take place in a tightly coordinated sequence, not just on Day 1 itself, but during the entire first week or two post-closing. All should be considered when planning Day 1. At the same time, it’s important to ruthlessly prioritize actual Day-1 changes to just those few essential changes that absolutely must take place on or before Day 1, but then execute them flawlessly and communicate about them relentlessly.
Finally, if your organization primarily does simultaneous “sign and close” deals, as is common with many smaller private acquisitions and highly sensitive tech or IP related deals, then you’ll want to work even harder than the average acquirer at codifying the optimal set of actions, communications and timing required to stabilize and mobilize the target company beginning on Day 1.
This downloadable resource, Getting Day-1 Right, highlights a few of the core principles and objectives to emphasize. The points below offer a few additional suggestions we’ve had great success with in live integration efforts with clients.
Implement Day-1 Readiness Report and Process.
Define Day-1 plans as one of the initial deliverables for each integration workstream. This should be a formal requirement that is consolidated into a comprehensive Day-1 Readiness Report, then reviewed and approved by the Steering Team, and then managed to completion by the Integration Management Office (IMO). In larger deals, this usually occurs in the first few weeks after the workstream charter is finalized and after the initial as-is process analysis is completed between the respective companies.
Highlight Critical Interface Issues through Gap Analysis.
Use each function’s core process mapping and gap analysis to walk through all core workflows and reveal interim operating requirements, questions to resolve and preparations to be made on the common “what to/how to/who to” types of issues. We also like to review the core business model elements on both sides of the deal (e.g., unique customer value proposition, customer channels/segments/expectations, key internal value-creation activities required to accomplish customer expectations, etc.) to ensure nothing slips through the cracks.
Use Day-1 Playbook and Training.
The more you are able to articulate and document what specifically will and won’t change beginning on Day 1, the more successful you will be. Everyone on the buyer’s side should have a formal briefing, not just on communication messages, roles and responsibilities, but also on the immediate, transitional governance model, decision authorities and interim coordination events or processes that will be used.
Watch out for Cultural Flashpoints.
If you’ve done a professional job in completing an effective due diligence on the target company’s organization, talent and culture, the next step is to anticipate those highly emotional or historically significant cultural norms that will certainly pop-out as “what about…” questions. Our advice to executives is often to look for certain target company distinctives that you can leave alone, import or celebrate as “best practice” immediately upon closing the deal.
Engineer at Least One “Big Win.”
For all the talk in M&A integration circles about quick wins, let me quote that famous M&A integration executive, Toby Keith, who said, “What we need is a little less talk and a lot more action!” The most successful Day 1’s we have been involved with are those that bring more than trinkets and slogans to the party. If you can deliver some significant and work-related value-add to your newly acquired workforce, you will almost certainly ensure a great start. Here are some of our favorite big wins:
- Mentors or ambassadors to help guide new team members on the “what to/how to” questions
- Common directory look-up
- Common calendaring capability
- Immediate email interface
- Access to and training on unique buyer-company systems that will support and enable day-to-day work to be faster, more convenient and more hassle-free.
That’s how to get Day-1 right!