However, speed is imperative for the seller as well. Think about it – you won’t collect your check until the deal closes. But there is more at stake than just the initial payment. You may have agreed to an earn-out or other ongoing compensation, and you likely won’t hit the targets if acquisition integration fails. Moreover, the future roles of you and your employees can be dramatically impacted by the acquisition integration plan.

So what should you strive for? Be involved from day one. Help to put together the acquisition integration team – in fact, you should have a team that mirrors the buyer’s integration team. Insist on this level of involvement – and if the buyer balks, maybe you’d better think long and hard about why they don’t want you playing a role in the process.

During this time, you should also look out for those individuals with a stake in your transaction: your employees, customers, suppliers and shareholders. If they are important to the new company’s future, you must understand the buyer’s plans and be able to communicate them to these stakeholders. Throughout the integration, watch how the buyer handles the human aspects of acquisition integration, including communication and compensation.

In this step, you will merge operations, processes and cultures to realize your objectives. As you integrate, focus on re-validating all of the plans you developed since the mergers and acquisitions deal was first considered. Remember, this is an iterative process – evaluate what drives value, what is working and what is not. And throughout, remember speed is critical at this stage – delay drives failure and may cost you key people. This is the time to sweat the small stuff, like being sure that acquired employees know how to enter expense reports and check their benefits.

Track performance at every stage. Before the mergers and acquisitions deal ever closes, determine key metrics and develop a reporting process around them. First, thoroughly document your expectations, potential savings, and your plan. If you neglect this step, your savings are likely to slip away. Report early and often – when public companies merge, Wall Street analysts track closely their success in achieving the savings they claimed for the deal. Private companies should do no less.

Establish post-merger integration milestones that are on equal footing with performance milestones. They should also measure and drive value creation. If you expect revenue growth in the first year, you must expect to hit each post-merger integration milestone. Tie incentive plans and earn outs to the completion of milestones. Also execute essential day one activities: control, communications and governance. Drive the acquisition integration deep into the organization, holding managers responsible for successful execution of each. Throughout, focus on the future – not how things “used to be done.”

This concludes our four-part series on realizing value on strategic acquisitions. Learn more about preparing for M&A with Tatum Thought Leadership whitepapers and special reports.

For more information about Tatum’s Mergers & Acquisitions services, click here.

Value is not made when you sign a mergers and acquisitions deal – it is made during acquisition integration. More deals fail due to poor acquisition integration than any other factor, so begin your post-merger integration plan as soon as the target is identified. Develop your plans according to function and accountability, and concentrate on those issues raised during due diligence that threaten your ability to realize value.

As you develop your post-merger integration plan, remember the four Cs of acquisition integration:

• Compensate – If you want existing management to stay, make their targets achievable and compensate appropriately.
• Communicate – People on both sides of mergers and acquisitions should be completely aware of what’s going on to help quell rumors and paranoia. People will respond to uncertainty by assuming the worst.
• Care – How you react to challenges can make all of the difference. Even small inconveniences can generate ill feelings. Respond quickly and completely.
• Cull – If you must say goodbye to any members of management, make your decisions quickly, but carefully.

Major transitions require strong leadership; it sets the tone for savings and efficiencies. That is why it is critical to create a transition steering committee and a functional team. These groups should engage leaders from both sides – those with a stake in the strategic acquisition. Members of the acquisition integration team should understand their role in realizing value assumptions. They should set their expectations high and work from a well-defined work plan, revisiting it as conditions on the ground change. The acquisition integration team must include line managers who are close to the action and can see problems brewing

Keep in mind, acquisition integration provides an ideal time to leverage economies of scale and shared resources. As you plan, consider whether centralized functions make sense.

Learn more about preparing for M&A with Tatum Thought Leadership whitepapers and special reports.

For more information about Tatum’s Mergers & Acquisitions services, click here.

Due diligence is more than a light audit or an exercise of checking arithmetic. When done properly, due diligence should test the strategic fit of the acquisition.

First, consider your goals for this acquisition and the drivers of the valuation. Knowing what you need to preserve will dictate what you need to test for in due diligence. Your overriding goal is to verify that the value you expect is actually there. It encompasses financial, operational, legal, technology and people due diligence. There is also customer due diligence – understanding what cements those relationships and how to sustain them.

Also plan generously for transition and closing costs – making sure the strategic acquisition or merger is financially viable pre-purchase. As a rule of thumb: acquisition integration will cost at least 10% of the acquisition price. If you cannot absorb a wide swath of sensitivities around forecasted performance – if it all must go right from day one – it won’t succeed. Your post-merger integration plan should include performance tracking measures that post-close will help you monitor the transaction’s success.

Learn more about preparing for M&A with Tatum Thought Leadership whitepapers and special reports.

For more information about Tatum’s Mergers & Acquisitions services, click here.

If you are considering mergers & acquisitions, your first step should be to define your goals and success factors. The basis of your strategic acquisition or merger should stem from an analysis of your current competitive position and your future objectives. That means understanding what you’re doing with your business, where you want to go and what you value most.

Ensure you understand what it is you are trying to gain through this strategic acquisition or merger. Is your goal to increase market share? Do you want to enter markets contiguous to your current ones? To acquire new products, processes and intellectual capital? To increase your economies of scale so that you can be the low cost company in your market? Perhaps you are trying to eliminate a competitor, expand a product line or achieve a vertical integration.

Regardless of your goals, focus on them relentlessly throughout the process and align your decisions with them. The strategic acquisition or merger should be a way to achieve business alignment between your company’s current state and the future state you desire for it. These factors become the items to test for in screening prospective targets and then performing due diligence.

There are a number of important factors to consider as you screen targets for strategic acquisition. One is acquisition integration feasibility. What are the organizational and operational challenges of integrating them? For example, which of the key people would you want to keep and would they stay? Another integral step in evaluating targets is developing revenue and cost models for the combined organization. Define key success factors to realize value along with “threshold” assumptions and a business forecast to understand what you must achieve for the strategic acquisition to be successful.

As you search for mergers and acquisitions candidates, avoid becoming too fixed on a particular one – search for alternatives and understand the pros and cons of each. Though a target may seem to be a perfect fit that is equipped with just the right management and expertise, there may well be drawbacks.

For example, a potential target company may require that you seek additional capital, either through debt or equity. Its financial statements may be “dressed up” or it may be overly reliant on a few key people. Hidden issues like a culture clash can also sink any transaction.

Learn more about preparing for M&A with Tatum Thought Leadership whitepapers and special reports.

For more information about Tatum’s Mergers & Acquisitions services, click here.

In the next 60 days the percentage of respondents who expect improvement in financing conditions in the next 60 days declined to 25% from 32%. The percentage saying conditions will get worse declined to 2% from 9%.

We are seeing that fewer respondents are seeing conditions getting better, but at the same time, fewer are seeing financing conditions getting worse. We interpret this as a stabilization in financing conditions, without a distinct trend.

The complete commentary and report can be found in the Perspectives section of Tatum’s website.

Over the next 60 days the outlook for Capital Expenditures is, again, mixed, with fewer respondents experiencing an increase in commitments and fewer also experiencing a decrease. The percentage of respondents who said they plan to commit more for capital assets in the next 60 days decreased to 36% from 41%. However, the percentage who expect to commit less decreased to 8% from 12%.

Capital expenditure commitments are made based on decisions of one or more months in the past. In the past 30 days, commitments softened. However, the outlook has turned into a mix that we interpret to be flat. We see this mix in other indicators as well, suggesting greater differentiation in outlooks in different industries and markets. That is, the recovery is less evenly distributed.

The complete commentary and report can be found in the Perspectives section of Tatum’s website.

Over the next 60 days the percentage indicating they plan to increase hiring experienced an increase to 29% from 25%. The percentage who expect to reduce hiring remained flat at 6%. 

This mixed picture for employment shows rising new hires, and this is a refreshing indication following a number of months in which the best news was reductions in layoffs. We interpret this as an improvement in the employment situation overall. 

The complete commentary and report can be found in the Perspectives section of Tatum’s website.

The recovery is continuing but at a slow rate. The outlook is softening. The outlook is influenced by the potential effects of international developments, rising oil prices and budget concerns at the national, state and local levels.

Demographically, the Southwest region continues to be by far the strongest, due in part by the positive effects on the region of rising oil prices. International businesses (mainly exporters) continue to be strong due in part to the weakened United States. High technology and manufacturing businesses are the strongest sectors.

The complete commentary and report can be found in the Perspectives section of Tatum’s website.

A recent KPMG survey indicates 75% of U.S. companies will wait for the SEC’s adoption of convergence before addressing the issue. However, as many companies saw with SOX compliance, waiting until the last minute could be detrimental and costly. By acting in advance, companies can capitalize on strategy and opportunities, instead of scrambling to meet deadlines. However, unlike SOX compliance, GAAP convergence will have a much wider impact, affecting both public and private companies of all sizes.

The movement toward IFRS can have its benefits, particularly for global companies already reporting under IFRS. Convergence will likely streamline accounting operations and reduce the costs of having two separate systems. According to a recent article in Strategic Finance, “Whether your organization perceives the coming of IFRS as a threat or an opportunity may depend on … how much you and your accounting team know about the international standards and how they compare to GAAP.”

Learning the differences may seem like an impossible task for those who are completely unfamiliar with IFRS. However, beginning now to understand IFRS and how convergence will affect your company will help you in the long run.

Tatum’s upcoming webinar will help you answer questions such as: Does IFRS really affect my company? Should I wait until the SEC decides to adopt IFRS before considering how to comply? Register now for “Mind the GAAP: What You Need to Know about Convergence” on Wednesday, April 13 at 2 p.m. EST. Participants may earn one CPE credit (Accounting) for attending this webinar and participating in the polling questions.