The recession in the early 2010s put a lid on acquisition activity among industrial product and services companies. The survivors had a chance to enjoy low cost structure with optimistic projections. The economy moving out of recession created an environment where the industrial acquisition-oriented companies could restart their growth engines. For some, it had been a while since an acquisition. It has been important that future integrations succeed to keep investors happy and minimize negative impact on profitable operations.

Following are five steps a growth-oriented company can take to ensure the growth engine runs well:

1. One brand = one company

There is a myth that it’s important to save an acquired industrial company’s brand following an acquisition or else risk the chance of losing customers. Our research has shown the brand is at the bottom of the list of corporate purchasing decisions. Brand = status in consumer markets, not in industrial markets. The more successfully integrated companies have established a single brand across the organization.

One brand sends a clear message to employees and the market. Following the acquisition, employees of the target company will spend more time working and less time worrying about legacy issues. Holding onto an acquired company’s brand after an acquisition makes it difficult for the market to truly understand the company’s identity. Is this a real company or just a confederation of independent entities? Lack of cohesiveness makes it difficult for investors to make educated decisions about purchasing stock in the growth-oriented company. Studies show that companies with multiple brands providing similar industrial services have a lower shareholder return than those with one brand.

2. Information transparency

Obtaining timely and accurate business information from an acquired organization is necessary to ensure compliance and operational efficiency. It is not good enough to integrate general ledgers so a single balance sheet, income statement, and cash flow statement can be generated for stockholders. That only provides high level financial information, nor critical information that drives behavior.

Developing a process for defining and gathering critical information from operations, finance, and sales will drive transparency to critical information. Companies need to identify and develop performance measures that can be captured consistently and leveraged across the company. Once the measures have been defined, a well-controlled reporting process should be implemented to allow management to monitor critical business activities.

3. Functional accountability

A key strategy for achieving the planned efficiencies by integrating the new organization is through standardization of processes. One simple way to help accelerate the adoption of these processes is to implement a functional reporting structure. This could mean that Division Controllers have a solid line reporting relationship to a Corporate Controller instead of the Division Operations VPs. A dotted line relationship to the Division Operations VPs can remain for operational accountability. This dual reporting structure helps these critical positions adopt and implement standardized processes across the company more rapidly.

4. Infiltrate the organization

One of the most significant integration challenges is getting people to understand and accept that they are part of a new operating model. One of the quickest ways to do this is to assign the best resources to positions throughout the organization, ensuring the right cross-pollination of ideas and culture.

The new organization benefits through the formal and informal network in which the “infiltrators” operate. When questions arise, the “infiltrators” can quickly reach into their network to get answers or share the historical perspectives that drive how the acquired company should be operating. When best practices are identified, they can be shared quickly through the network.

5. Our way or the highway

Resistance to the new organization’s ways will occur from those who don’t like change. The source of this resistance could be within either of the companies involved in the acquisition. If this resistance cannot be overcome by certain staff, they should be sternly encouraged to find opportunities elsewhere. In our research, we have found more than 80% of executives in post-merger situations wish they would have acted more decisively with the resistors.

If these individuals are not won over or re-tasked quickly, they can easily pollute the well and make it difficult to create and sustain the right culture for the new organization. It is often better to find an exit path for naysayers than to try convincing them things are better now than before.

None of these steps are easy. However, they are necessary to help ensure an acquisition-oriented industrial company obtains the benefits of new additions to the organization. Otherwise, the acquisition-oriented company may face unnecessary challenges with employees, customers, vendors, and shareholders.

At this point, you likely know integration comes with challenges. Continue reading to learn about the realities of integration and how you can prepare.

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