Mergers and acquisitions (M&A) can bring transformative opportunities for businesses, offering growth, greater efficiency, and expansion into new markets. Yet, the success of any dealership M&A transaction hinges on the effective integration of the two organizations. It is a sobering fact that most post-merger integrations (across all industries on average) ultimately fail.
According to PwC’s 2023 M&A Integration Survey, successful M&A organizations, defined as reporting significant success across all three survey measures – strategic, operational, and financial – are exceedingly rare. Only 14% of the survey respondents indicated that they had achieved this level of success.
The solution to post-merger anxiety and the best way to increase your chances of smooth and beneficial integration is to have the right advisors on your side. At the Dave Cantin Group, our seasoned automotive M&A professionals are there for you even after closing, lending their expertise to guide the integration process to its greatest potential. Contact us today to speak to one of our M&A advisors specializing in automotive, powersports, RVs, heavy trucks, and other dealership-based businesses, or read further to learn the foundational strategies for a successful integration.
Post-Merger Integration Tips
Set Clear Objectives
Goals can only be achieved if objectives are clearly defined and measurable. Dealership M&A transactions are no different. Establish what your organization aims to achieve through the merger. For instance, increased market share, new product offerings, enhanced capabilities, or cost savings. Create a roadmap with major milestones and determine how success will be measured.
Form Integration Team
Put together a comprehensive group of individuals from both entities. The team should include members from departments such as IT, HR, finance, and operations. This helps ensure that all potential obstacles are identified and that stakeholders are working together to achieve a successful integration. Assign clear roles and responsibilities to team members.
Communication is Key
Communication throughout the integration process is critical, keeping all stakeholders informed about the progress, objectives, and benefits of the M&A transaction. Address concerns promptly to minimize potential uncertainty.
As a best practice, develop a communication plan. Include clients, suppliers, partners, and external stakeholders. In addition to internal communications, deliverables often include press releases, emails from executives, and even presentations for meetings with employees.
It is important to understand the cultural nuances of both dealerships. Failing to identify significant cultural differences can create friction and jeopardize the successful integration of the companies. Start by conducting cultural due diligence and defining what the desired culture is for the new entity. Involve employees to foster a sense of ownership and commitment to the cultural alignment process.
Identify Synergies and Integration Opportunities
Identify areas where the organizations can achieve synergies. Examples might include streamlining operations, leveraging shared resources, and eliminating duplicate processes. By capitalizing on these integration opportunities, all parties can derive the most value from the M&A transaction.
Complex integrations can take several years to complete. It is crucial to develop a long-term integration plan that includes important considerations such as technology, the evolution of the merged entity’s target operating model, key customer-facing functions, internal functions, and the evolution of products and services – including the rollout of new types of vehicles such as EVs in the case of automotive retail. The roadmap should outline the sequence of activities and set clear milestones and timelines.
Employee Engagement and Retention
Retaining key talent from both entities helps maintain business continuity while also optimizing the benefits of the merger. Develop plans for keeping employees engaged throughout the integration process, creating channels to facilitate open communication, and providing growth opportunities to retain valuable personnel.
There are many potential risks associated with M&A transactions. And many integrations ultimately fail because the parties failed to identify and assess the risks associated with the integration. For instance, regulatory challenges, loss of key customers, or operational disruptions may all present issues, and only by being prepared can you overcome such challenges. Once you identify all potential risks, you can develop plans to mitigate them and ensure a seamless transition – at DCG, the members of our M&A team leverage their on-the-ground industry experience to assist our clients in executing their transition plans.
IT System Integration
Two entities rarely utilize similar tech stacks and systems. IT professionals from both sides must work together to harmonize disparate systems to enable operational efficiency. This includes addressing compatibility issues, ensuring data security, and consolidating systems where necessary.
Disruptions in products, services, and/or support during or following the merger can be devastating to the new entity’s business. Develop plans to ensure that customer-facing processes, products and services, and communication channels remain intact throughout the integration and that they are ultimately improved by the merger.
This step is critical for tracking the M&A transaction’s financial impact and realizing its full benefits. Stakeholders must merge financial processes, systems, and reporting to facilitate accurate financial analysis and decision-making, as well as ensure that all obligations are met. In some ways, this process is intertwined with IT system integration since disparate financial solutions must be merged and new ones put in place. DCG’s M&A advisors are renowned for their experience in dealership finance among many other areas of business, and our CFO consulting services can provide a great deal of financial peace of mind after an acquisition.
Monitor and Evaluate Progress
To reiterate, it is absolutely critical to define clear objectives at the outset of the M&A transaction. By doing so, stakeholders can regularly monitor the progress of integration activities against established milestones. Be sure to consistently assess whether your objectives are being met and be prepared to pivot as needed to stay on track.
Any merger is a lot of work requiring the contributions and sacrifices of many people. To stay on track and boost morale, make sure to recognize and celebrate achievements along the way. Acknowledge everyone’s hard work and the collective achievement of post-merger milestones.
DCG Knows How to Navigate Post-Merger Integration Challenges
A successful M&A transaction is very much dependent on a well-executed post-merger integration. This is the product of meticulous planning, collaboration, and execution. By setting clear objectives, forming a dedicated integration team, fostering communication, and addressing cultural alignment, organizations can successfully navigate the complexities of merging while realizing their strategic goals.
The Dave Cantin Group (DCG) is a leading M&A advisory company serving dealer-driven businesses in North America across diverse sectors including automotive, motorcycle, powersports, heavy trucks, and recreational vehicles. We provide a broad cross-section of services and have helped countless organizations to successfully navigate post-merger integration challenges. Our expert automotive M&A specialists manage efficient, high-return acquisitions and have closed billions in transactions to date.
Contact DCG to speak directly with an automotive M&A specialist and learn how our expertise can help you get the most out of your next transaction.