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Greg Ast
Greg Ast is president of Legasus Group (www.LegasusGroup.com), a family business consulting firm offering services designed to enhance clients' growth, success and profitability. Legasus Group has a staff of trained professionals - specialists in management, family-owned businesses, strategic planning, profit enhancement, finance, international business and executive development that work with family-owned and privately-held businesses. You may contact Greg at (316) 681-0444 or by e-mail at gast@legasusgroup.com.
Business Consulting
2002-06-01 17:41:00
Purchasing a business?
Question:  We are a local Sedgwick county machine shop doing approximately $5 million in annual sales.  We are about to purchase another machine shop specializing in other types of work doing approximately $4 million in sales.  All in all we should have around 60 employees when the purchase is complete.  We want to be sure we handle things in a seamless fashion, but we do not want to miss anything.  Is there any type of checklist we need to be aware of from an administrative perspective?
Answer:  Studies indicate that most mergers/acquisitions fail for two reasons: culture and "people issues."  Managing change well during the acquisition process is critical to the success of your merger. Your desire to anticipate these potential problems is important as you "close the deal."  I would recommend that you immediately create an integration team responsible for focusing on two important areas of the acquisition process.  The team would create and administer two plans: a change management plan and a communications plan. CHANGE MANAGEMENT PLANA simple change management plan would have six columns: (1) department functions/processes; (2) current way of doing business for your company; (3) current way of doing business for the acquired company; (4) variance in processes, people or policies; (5) desired new way of doing business; and (6) action steps to move from the current way of doing business to the new plan.  Levels of change will vary greatly. Combining operations creates a greater need for assimilation of people, processes and policies.  If the acquired business is remaining separate, your focus may be more on purchasing, accounting, or other administrative areas.  However, I still encourage you to do this exercise across the entire company.For example, ask your controller to describe the current payroll processes for both companies  (columns 2 and 3), the differences between the two (column 4), and the expectation for the new way of doing business (column 5).  This allows you to identify potential changes to timecards, payroll periods, etc. and policy issues such as benefits, vacation pay, etc. Remember, the goal of a change management plan is to allow for employee input and employee understanding of "where we want to be" when the combined company is successfully operating.  When difficult decisions arise regarding overlapping roles and the elimination of positions, make sure these decisions are handled in a well-thought out manner. COMMUNICATION PLANUse a communication plan to help you anticipate communications requirements. I would suggest the following five columns: (1) message; (2) audience; (3) medium; (4) sender and (5) follow-up or frequency. Have two goals: the identification of changes and the messages that need to be communicated. Relating to the example above, you might create a plan for communicating payroll processing changes (column 1) to supervisors, employees, banks or payroll processing companies (column 2) through face-to-face meetings, memos, paycheck inserts, letters, or phone calls (column 3), handled by the controller (column 4) and probably a combination of the above for supervisors and employees (column 5). Make sure the CEO/president is supportive of both plans and that these plans are in place before the deal closes.  Ideally, your team will include people from both companies and will be held accountable to the board of directors.  Do remember that a good integration process takes time - at least a year.
 
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