Communicate for talent retention and business continuity
Understand how the deal effects employees at both companies, then choose a communication strategy that fits the deal:
- Larger deals can cause uncertainty for employees of both companies — they can be worried about how the deal will affect them and whether they will continue to be part of the larger company. Communicating the integration plan to all employees and then executing quickly can help make things clearer.
- When a smaller company is purchased, the uncertainty falls almost completely on the employees of the target company. The buyer needs to be clear that the acquired asset will stand alone (if it will) and that sales incentives and performance metrics will remain the same to help alleviate those concerns and retain talent.
Revenue synergies, cost synergies or both?
Cost synergies achieved through the reduction or elimination of duplicated costs vary across CPR subsectors. Recent EY analysis of precedent transactions shows that the median cost synergy as a percentage of target revenue in the consumer subsector is 5%-6%, while retail produces median benefits of 3%.
Revenue synergies instead could be the deal driver:
- When integrating a larger deal built on cost synergies, arduously tracking synergies against a well-defined road map and issuing weekly updates to make sure the integration remains on pace to deliver the promised value is essential.
- That same rigorous measurement and communication could crush a smaller acquisition. Find relevant drivers, such as revenue growth or new customers, to provide some measurement and accountability, but do so with sensitivity to the target’s culture.
- Revenue synergies could be the deal driver, even in larger deals. CPR companies have driven out costs for years, but many struggle for growth. Look to the top-line as the key synergy. Can you expand distribution without harming the acquired business? Can you bring the product to new geographies? Cross-selling new products to new customers and pricing power are two examples of revenue synergies.
Value creation comes from tailoring an integration plan to the specific deal. Is the goal cost reduction or enabling the burgeoning growth of a newer business? The M&A integration playbook used in the large deals that produce major synergies could stifle the growth of a smaller addition. Having different playbooks for large and small CPR deals could be the key to realizing the biggest benefits from any type of deal.