Integrations are complex. A typical transaction can significantly impact a company’s fundamental processes and organization, and typically requires making changes under a tight timeframe. Compounding this, many of the individuals involved in the integration may face uncertainty about their future positions in the newly merged organization and face significant pressure to achieve accelerated outcomes.

For this reason and many others, companies should prioritize managing the integration through a well-structured Integration Management Office (IMO).

Stout has successfully supported clients in these situations, and our practitioners have developed a series of best practices on how to run a successful integration in even the most challenging deals. Below, we outline some of these best practices and explain how they can contribute to better outcomes.

  1. Running an IMO is about driving deal objectives, not just project management, tools, and templates.
  2. A strong IMO is about more than just project management. Because of the unique requirements of the deal environment and the significant impact of a deal to organizations, as well as the potential for value creation (or value destruction), the IMO needs to assume several critical roles in guiding the integration.

    Based on our experience, some of the key roles include:

    • Maintaining focus on deal objectives: While it is easy to get buried in the details of all the activities that need to be completed to execute on the integration, the IMO must keep the team focused on overall deal objectives. In this role, the IMO is responsible for developing and vetting the integration strategy with the deal team, business leaders, and the functional team to ensure that the integration focuses on elements of the integration that ultimately create value for the joint organization. This might involve de-prioritizing certain aspects of the integration while emphasizing those elements that are critical to achieving success.
    • Implementing and managing integration governance: The IMO is responsible for maintaining the proper governance over the integration program, ensuring that decision making is handled at the appropriate level and complex issues are escalated when necessary. This entails ensuring the proper individuals – those who have a deep understanding of the business and can drive decisions and execute the integration – are actively involved in the integration programs.
    • Managing the integration timeline and issues: The IMO develops and maintains an overall integration timeline while identifying, managing, and addressing issues as they arise throughout the integration program.
    • Selecting, deploying, and managing tools and processes: The IMO establishes the tools, templates, and meeting cadence that will be implemented to manage the integration process. It facilitates the development of standardized deliverables across teams and ensures that interdependencies across teams are properly managed.

    The additional best practices below build on these key objectives of the IMO.

  3. Implement proper governance to allow executives to focus on the big picture and functional teams to drive integration execution.
  4. Establishing proper governance is one of the first steps in standing up an integration program. This includes identifying who will lead the integration, determining which functional teams need to be engaged, deciding whether dedicated individuals will be assigned from key functions, assessing what support staff are required within the core IMO, and evaluating the potential use of external resources.

    Key considerations when establishing an IMO team consist of:

    • Degree of Change: Understanding the extent of these changes can help in appropriately staffing the IMO and preparing for potential challenges.
    • Geographic and Jurisdictional Factors: Integrations that span multiple locations or countries may require additional resources to handle local business and regulatory requirements and cultural differences, which can complicate the integration process.
    • Timeline and Team Size: An accelerated timeline may necessitate a larger team, albeit for a shorter period, to meet the tight deadlines. Conversely, a longer timeline might allow for a smaller, more focused team.
    • Functional Area Support: Areas such as IT and Finance and Accounting (F&A) may require dedicated resources during certain periods if significant changes are being implemented to systems or key financial processes. In larger deals, organizations might consider temporarily reassigning functional team members from their regular duties to focus exclusively on the integration program.
    • Transaction Size and Team Requirements: While the size of the transaction can impact the size of the integration team, it is important to note that large deals do not always require large teams. This is particularly true if the business will be allowed to operate on a relatively standalone basis. The needs of the integration should dictate team size and composition rather than the size of the deal alone.

  5. Leverage the IMO to define and drive the overall timeline and high-level integration plan.
  6. The IMO should collaborate with functional teams to understand and plan for key dates, such as systems cutovers, significant process changes, and any major milestones that may impact customers, employees, or other stakeholders. The overall timeline should address dependencies between functional teams to ensure a cohesive and coordinated approach.

    For complex projects involving multiple changes, it may be beneficial to hold dedicated sessions to identify and address key dependencies among functional teams. By defining the key milestones, the IMO can help functional teams in aligning their respective project plans with these critical points, ensuring a unified and efficient integration process.

  7. Align the scale of the IMO to the complexity of the integration.
  8. The IMO can vary from a single individual supported by part-time functional teams to large, complex organizations staffed with a combination of internal and external resources. Given the complexity and risk associated with integration, it is safer to assume a slightly larger team will be necessary and then scale back if some resources are not needed rather than underestimating the effort and quickly falling behind.

    Before engaging the broader organization, a smaller team can be tasked with scoping the effort, establishing the IMO, and determining the appropriate team size. The scale of the team should consider the number of impacted geographies, which functional teams will require support, the degree of integration required, and the overall timeline for executing the integration.

    The size of the IMO can also vary over time, starting small as the scope of the integration is determined, growing during the peak of integration planning and execution, and ramping down as key milestones are met.

  9. Choose integration tools and templates that best meet the needs of the integration program.
  10. An early objective of the integration team is to select the appropriate tools to manage the integration program. For most middle-market transactions, simplicity is key. Even large deals can be managed effectively with basic Microsoft Office tools (like Excel and PowerPoint), provided they are used appropriately.

    While more complex online tools from providers like Smartsheet and Midaxo can offer significant advantages for larger transactions, there are costs associated with implementing and maintaining these tools that should be weighed before deciding whether to leverage them.

    We have seen these tools successfully utilized in large, global transactions where the integration team operates across time zones and needs to be implemented in multiple jurisdictions. However, for smaller transactions in a single jurisdiction, or for companies that are doing smaller, less frequent deals, the effort required to manage such tools can easily outweigh their benefits.

    Finally, for organizations that are highly acquisitive and doing multiple transactions with similar strategic objectives, developing an “integration playbook” that codifies the integration strategy and approach, target timeline, and key activities across major functions may be a worthwhile investment.

  11. Log and manage an issues list to ensure that risks, assumptions, issues, and dependencies that arise during the integration program do not slip between the cracks.
  12. Given the tight timelines during the deal process, many integration issues and risks often go unidentified until the program is formally launched. It is common to use a RAID log (Risks, Assumptions, Issues, and Dependencies) to track these items, although it may be known by other names in various organizations.

    Processes should be established to ensure that issues are documented and monitored to verify that they are being addressed. The RAID log could be as simple as a spreadsheet or may utilize an online system for greater accessibility, especially when team members are not co-located.

    Items should be prioritized and monitored to ensure all issues are resolved, with particular focus given to those with broader impacts. This prioritization ensures that critical issues receive the proper attention they require.

  13. Actively manage dependencies between functional teams to ensure teams are aligned around integration decisions and actions.
  14. Decisions made by each functional team can have significant impacts on other functions, and there are often cases where the preferred approach from one team can create complexities for others. The IMO plays a crucial role in mediating these dependencies and determining the best course of action for the overall integration plan.

    When necessary, organizing ad hoc meetings to address specific issues can accelerate the decision-making process regarding the integration approach. For example, determining if employees will be brought on to the buyer’s Human Resource Information System (HRIS) could have ripple effects for F&A and IT.

  15. Leverage the IMO to inform the executive team and escalate key decisions.
  16. Executives and the board must be updated regularly on progress against key deal objectives, including the achievement of anticipated synergies. The IMO lead should leverage meetings with executives to seek direction on key decisions or when significant trade-offs need to be made.

    For instance, there may be trade-offs between aggressively pursuing synergies and potentially impacting customers. The IMO must ensure that the teams affected by these decisions are kept informed as these decisions are made.

    It is common to have an executive steering committee oversee the integration program. This committee usually comprises key executives whose teams are involved in the integration or are impacted by its progress.

    For significant transactions, meetings may occur as frequently as weekly during critical phases, but this frequency typically decreases to monthly and eventually to quarterly over time as the integration progresses and stabilizes.

  17. Ensure consistent messaging around the integration, both internally and externally.
  18. Groups that are likely to require ongoing communications include customers, employees, investors, and vendors. While the specific message to each group may vary, there should be consistency around topics such as the rationale for the merger, high-level objectives, and the general timeline for the integration.

    The IMO should collaborate with departments such as Sales, HR, Procurement, and F&A to determine the necessary communications are made and ensure alignment in overall messaging. Each group can then tailor the specific messages of their respective communications.

    For example, HR would communicate to employees regarding changes related to payroll, benefits, job titles, or reporting structures. F&A would inform stakeholders on changes regarding payment process or how disbursements might be impacted.

  19. Don’t neglect the people and cultural aspects of the integration.
  20. Finally, and perhaps most importantly, companies should not neglect the human element of an integration. Numerous deals have failed due to a lack of cultural alignment between organizations. Cultural and people-related issues should be addressed early in the diligence process, with risks assessed alongside financial, legal, tax, and other diligence considerations.

    The IMO should work closely with the HR function to identify and manage cultural and organizational aspects of the integration. This includes assessing organizational changes, addressing cultural differences, ensuring proper support for employees impacted by the transaction, (at both the target and buyer) and maintaining effective communication with employees during the process.

    Summary

    Properly managed integrations are crucial for the successful execution of complex transactions. To achieve this, the IMO’s responsibilities should extend beyond mere project management to include strategic oversight, governance, timeline and issue management, and the selection of appropriate tools and processes.

    Leveraging the right third-party transaction advisory partner can provide valuable expertise and support, ensuring that dependencies between functional teams are managed and that key decisions are effectively communicated to executives and stakeholders.

    By adhering to best practices, companies can overcome the complexities of integration and drive value from their deals.