5 Mistakes SaaS Companies Make During Post-merger Integration
If your SaaS company is scaling quickly, part of your growth plan likely includes mergers and acquisitions. These transactions allow you to develop a broader product portfolio, expand your market, or both; increase revenue; and bring down costs as a percentage of revenue.
While SaaS companies are accustomed to moving fast, you may have experienced the post-merger integration period as a challenging time—try to create change too quickly, and you end up taking a few steps backward before you can make progress again.
At OpFocus, we understand the inherent difficulties that arise during post-merger integration. In this piece, you’ll learn five common mistakes that SaaS companies make after they merge with or acquire a new organization.
Avoid These Mistakes During Post-Merger Integration
Underestimating the work involved in post-merger integration
SaaS companies that haven’t experienced an acquisition before may think that the deal is done once the ink on the contract is dry. In fact, the work is just beginning.
Finance and legal teams tend to be the most buttoned-up with integration, in part because they’ve done significant prep work to make the transaction happen. But the true nature of post-merger integration is the opposite of transactional: the goal is to truly bring together two companies.
That means handling a number of people-related issues, aligning technology, and overall change management, for starters. The effort required in the first several months is tremendous—and it falls largely on the shoulders of leaders in the acquiring organization. You can’t always reduce the amount of work involved, but you can—and should—plan for it and act accordingly.
Not building a comprehensive, thoughtful plan
When companies underestimate the work involved in post-merger integration, they also devalue the need for a comprehensive plan to articulate everything that needs to happen during this period. This situation is a bit of chicken-and-egg: not having a clear roadmap also leads teams to continue underestimating the amount of work involved, creating a cycle that creates unnecessary chaos and leaves everyone feeling overstressed.
When companies don’t plan, their only recourse is to respond reactively to the problem that’s in front of them. At OpFocus, we see this challenge most often with companies that do acquisitions on an ad hoc basis, as companies that acquire regularly have repeatable playbooks to manage post-merger integration.
Failing to manage their data effectively
Most SaaS companies take a “capture first, organize later” approach to their data during a post-merger integration. They import all their data to a single database, acknowledging that there will be problems and planning to sort it out later. But that approach creates problems almost immediately, as it leaves teams without a clean master data set to execute against.
You need a single source of truth for your customer and product data. Take the time to clean data sets for both companies before merging them. Then go through a conscious and comprehensive process of rationalizing, de-duping, and matching up data sets to develop that clean master as soon as possible.
Short-cutting transitions for departing team members
Every transaction results in role redundancy and some team members, often but not always on the acquired side, transitioning out of the organization. The problem is that SaaS companies are often so eager to exit people and move on to build the new org that they shortcut the transition.
When companies exit people too quickly, there isn’t an opportunity for those people to share their institutional knowledge, train others on existing processes, and establish a foundation for the other team members who will take on their responsibilities. The team members staying on end up scrambling, customers get upset, and any incremental cost savings are erased in the short-term—your team is wasting valuable time trying to get their feet underneath them.
Not clarifying the status of the acquired company
All too often, SaaS companies leave the post-merger status of an acquired company murky and unclear. Are they operating as a separate entity? Independent operations can work fairly well, at least in the short term. But in many cases, the goal is to bring the new company fully into the fold.
When that happens, there are important decisions to make. When you have two different ways of doing things, who wins? The bias may be toward adopting the practices of the acquiring organization, but blindly taking that approach can lead to missed opportunities for improvement.
During this time, evaluate everything: product offerings, licensing models, pricing policies, etc. Then, make a decision about how to proceed in each area and communicate it clearly to your team. Otherwise, you’ll end up with confused customers, overwhelmed teams, and overtaxed systems.
Post-Merger Acquisition Integration Can Create the Best of Both Worlds
Acquisitions and mergers create extremely challenging periods, especially for rapidly growing companies. But by planning ahead, making and communicating clear decisions, and allowing adequate time for your people and systems to adjust, you can have a successful post-merger integration period.
The truth is, there is no single victor in an acquisition process. You always want to take the best of both organizations and emerge with something stronger.
Interested in learning more about the post-merger process? Check out this OpFocus panel discussion, Nailing Your Next Acquisition. If you’d like to chat with one of our SaaS Growth Advisors about how we can support you through acquisition integration, contact us today!