By John Vogan and John Weeraratne
Lessons learned from mergers and acquisitionsBusiness & Professional Companies & People Engineering acquisitions Engineering mergers
Ensuring smooth integration is among the toughest challenges.
Mergers and acquisitions (M&A) are an ongoing occurrence in our industry, in many cases involving a larger engineering firm acquiring a significantly smaller one. Their potential full value is often not realized, due to staff integration issues, but there seems to be a dearth of published perspectives from the engineers actually involved with making these deals work. Here are a few observations based on successful—and not so successful–M&A with which we have been involved.
The roles of senior personnel
Engineers and scientists are, by nature, a cynical lot. Senior staff tend to take forecasts of increased client synergies and associated promotion and compensation opportunities in a newly combined organization with a large grain of salt.
Conversely, tempering the expectations of junior personnel in light of these forecasts is also important. When discussing the possible upsides, it is crucial to be transparent and realistic, to avoid subsequent accusations of ‘overpromising,’ whether real or perceived. Detailed back-up data behind optimistic forecasts should be explained and, if available, examples shown where the acquiring firm has previously met its promises.
Senior consultants in the firm being acquired can be both a blessing and a curse. Their insights into clients’ motivations, likes and dislikes will be invaluable in maintaining them. Relying on senior consultants to deliver post-merger messages to intermediate and junior staff, however, is precarious. Be it human nature, these individuals—many of whom may have been shareholders in their company—will undoubtedly put their own spin, consciously or not, on post-acquisition actions, often masking the true intent of these actions and/or affecting perceptions in a negative way.
One pratfall we have observed is ‘rewarding’ senior personnel in the merged firm with new positions for which they may not be truly qualified. This has often involved asking more in terms of people management skills, resulting in struggles and disappointment, not only for the promoted individuals, but also for staff members affected by the individuals’ actions in their new positions.
Examples of recent M&A activity
- WSP acquires Golder (2021)
- Ecometrix merges with Calder Engineering (2021)
- Englobe acquires MPE (2021)
- Arcadis acquires IBI Group (2022)
- CIMA+ acquires Westhoff Engineering Resources (2022)
The importance of communicating and promoting values and ethical principles that can be clearly understood by employees of both organizations cannot be overstated, accompanied by the unambiguous outlining of expected behaviours and codes of conduct. It is vital to quickly establish a significant leadership presence in the merged firm with individuals who embody these values, are empowered to make decisions and are deeply connected within the larger and/or former entities, so they know best where to go for help (e.g. “I know Jill in our Halifax office ….”).
Managing the integration should not be someone’s second or third job, which would slow down the process and send the wrong message to staff in the acquired firm. Rather, it may entail a full-time physical presence in the head office and extend to all regional branch offices, with frequent communication supported by face-to-face visits.
This physical presence helps to minimize culture shock as new customer relationship management (CRM), people management, accounting and health and safety policies and procedures are introduced. There is a danger the leadership of the merged organization may (or be perceived to) overprioritize such efforts, overwhelming and overshadowing the importance of preserving and championing existing good business practices from both sides.
While we caution against the overzealous implementation of new policies and procedures, hard lessons have been learned when less rigorous, laissez-faire reporting and accounting practices—which were the normal operating practice of smaller merged or acquired forms—were allowed to continue for too long, to the detriment of all.
An approachable senior person, routinely present to respond to concerns, increases employees’ comfort level throughout the merged organization, as will explaining “there are no dumb questions” regarding the new way of doing things and acknowledging “small hiccups will happen.”
At all costs, groups within the merged firm should not be used as ‘guinea pigs’ for testing new internal procedures for an extended period after acquisition.
Lastly, a significant leadership presence allows identification of any ‘nay-sayers’ unwilling to adapt to new realities. In such instances, it is best to execute respectful yet swift exit actions. Allowing stubborn intransigence to persist is disruptive and counterproductive.
Compensation and recognition
A primary post-acquisition focus is to ensure clients’ financial communications are uninterrupted. Every effort should be made to minimize financial disruptions internally, as well. There should be no hiccups in paying expenses due to new system implementation and any financial decisions affecting staff (<i>e.g.<i> a change in matched RRSP contributions) should be addressed promptly and clearly, with ameliorating actions undertaken concurrently.
It is crucial to recognize the skills and accomplishments of acquired personnel within the new, broader organization. Focus groups of representatives of both organizations, from a wide-ranging cross-section of employee levels and categories, can facilitate seeking input prior to the implementation of new procedures. This process must be more than just lip service, however, as dismissing or ignoring constructive feedback can cause irreparable damage.
Recognition of new staff members can be accomplished in a variety of ways, such as introducing them into internal video and conference calls and arranging for visits between the merged firm’s regional offices. A small, incremental spend for joint lunches and dinners will go a long way. Well-treated individuals often become internal champions for the acquisition.
A new brand
The timing of new brand introduction is important. We have seen instances where vigorously promoting a rebranding prematurely has created a sense of lost identity and focus among staff from the merged organization, especially where there is a significant size disparity between the two firms. However, it is surprising how the distribution of rebranded merchandise, such as coffee cups and jackets, at an inconsequential cost relative to the acquisition itself, can enhance staff’s acceptance and assumption of the new brand.
While many of the above observations may seem like common sense, we have repeatedly seen these issues not given their due attention in the push to make a merged company achieve its desired financial metrics. There will always be cultural and procedural differences in the antecedent organizations that must be recognized and addressed quickly. Relentless and genuine two-way communication is vital in understanding what is good and should be retained and what should not.
One of the toughest challenges for a leadership group is ensuring smooth staff integration, but doing so greatly increases the likelihood of the merged organization meeting its objectives.
John Vogan is a retired professional hydrogeologist who has held senior management roles in environmental technology and consulting firms. John Weeraratne, P.Eng, is a retired civil engineer with more than 30 years’ management and leadership experience in consulting engineering and construction. Both have been involved in numerous M&A over the past 25 years.
This article originally appeared in the July/August 2023 issue of Canadian Consulting Engineer.