Start Right: Day One of an M&A Transaction

  • Preparing for transition
  • 3/24/2021
Business men looking at laptop in office

A well-planned and well-executed close day can put you on a successful trajectory. Here are some things to be sure you don’t overlook.

Key insights

  • Clear and concise communication is key.
  • Consider that this is the first day of exposure for many folks who will help determine the success of the transaction.
  • Consider the culture of the companies at hand. Ease any potential system shock with a little bit of forethought.

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The team has worked hard to get the deal done. It looks like the close is imminent. Day one sets the tone for integration and your ability to realize the intended deal thesis. Have you properly prepared for this day and the days that follow?

Start with an ounce of prevention for any M&A transaction

Being very clear on how this transaction will impact the organizations involved is extremely important. While you do not need to share in great detail, if you are clear up front it can help alleviate many concerns and distractions, as well as allow individuals to identify opportunities to enhance the synergies.

In all transactions, there are a series of actions that should take place in a tightly coordinated sequence — not just on the day of closing, but in the weeks surrounding it. Many of these events are critical to keeping operations running and teams focused. While having the overall plan mapped is key, it is important to ruthlessly prioritize actual day one changes to just those that absolutely must take place on or before day one — and then execute them flawlessly and communicate about them relentlessly.

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, you’ll want to work even harder to determine the optimal set of actions, communications, and timing. This helps stabilize and mobilize the target company beginning on day one.

Review the core principles of a successful close day

1. Communication

Communication must be clear and concise — and cover all customers, employees, vendors, and other key stakeholders. What does this deal mean to them on day one, and when should they expect day two information?

The more articulate you can be about changes on the horizon, the more successful you’ll be. Even if the message is as simple as “nothing changes,” you must state it.

If you don’t spend enough time understanding and answering potential questions, it can create additional tension and distractions. Remember, many individuals have not been in the know and must now communicate with vendors, other employees, and customers about the deal. In most instances, human resources and finance are critical to this process; employees are a vital part of any M&A transaction.

2. Clear chain of command

Simply put: Who is in charge of what? Identify the critical interfaces and determine any barriers that may preclude people from doing their jobs. Think about this tactically, from a treasury and cash controls perspective — as well as how it may impact your customers. Set up clear clearing houses so employees understand how to resolve issues throughout the integration (e.g., who is responsible for answering that question, or approving this transaction).

This also means the acquirer has access to what it needs, from keys to system access. The transitional governance is crucial to the flow of integration, as well as being able to make timely decisions that align with the business’s intent.

3. Cadence

Define the speed at which you make changes. This can vary greatly based on a business’s culture, capabilities, and needs. Determine how to maintain the current momentum of the business without overwhelming the team that maintains it. Vet this with key individuals.

4. Cut-over

On the initial close date, you may be able to streamline the integration if certain actions are addressed at close. These range from glaringly obvious to easy-to-overlook: cash handling, bank accounts, and credit cards; payroll; employee benefits; systems; phone numbers; IT; and branding, among others. Make sure key functions and workstreams understand their cut-over considerations and it is clear what is changing and what is not.

5. Close support

In order to properly record the transaction, consider specific items, including closing the balance sheet with appropriate backup. This may be as simple as running reports, or it could require more complex actions, like scheduling inventories or changing procedures. Make sure there is someone on first who understands the terms of the agreements.

6. Culture

Throughout the process, consider the business culture at hand. Mergers and acquisitions can be an emotional process. Based on your due diligence, you should have an idea of the cultural norms that may need to be addressed in your planning and messaging.

Give appropriate attention to endings and beginnings

The close day sets the tone for an integration. Establish clear direction that does not disrupt or freeze the organization. Find the right balance among your core areas of focus. Executing a well-communicated and well-planned day one can be a powerful catalyst to set you down the path of achieving your integration objectives.

How we can help

No M&A transaction is the same. At CLA, our team of private equity and venture capital professionals work alongside you to understand your specific business needs and goals. We’re here to help every step to seamlessly guide you through the transaction process.

Remember that day one isn’t the beginning. Learn more about post-integration strategies that can help you look beyond the close.

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