A Guide to Small Business Mergers: Integrating Operations (Part 2 of 5)


This is the second part of a five part series on merging two small businesses.  In this section, we are discussing the next step of the merger, integrating operations.  This step would come after navigating the first phase of conducting a successful strategic partnership.

So you’ve had some good experiences with your strategic partnership.   Things are running smoothly, you’re building some synergies, and both sides are seeing mutual benefit from the partnership.   There is certainly nothing wrong with staying in the partnership phase.  In fact, instead of deepening your existing strategic partnership, this experiment might be encouraging to go out and seek additional strategic partners.  It is certainly worth a discussion to determine the benefits of continuing down the path of merging businesses versus looking at strengthening the current relationship.   Some questions you might ask to help decide:

What are the benefits of merging?

Can those same benefits be achieved with a strategic partnership?

Do the benefits make sense relative to the effort needed?   (Sharing of equity, legal costs and ramifications, combining roles and team members, learning new processes/systems/etc.)

What are the specific drawbacks or potential risks unique to your businesses with a merger?

Ed and Katrina, our real-life case study from the first installment of the series, asked themselves these very questions after they had been working on improving their business partnership over the last three months.   Things were going really well.   Katrina was brining a lot of new business to Ed and in turn Katrina’s clients were really happy with the extra service provided.  Katrina was also making revenue off the additional service offering and Ed was inspired to go back to his client base to find ways to introduce Katrina’s branding services to better serve his clients.   While they would continue to want to push faster towards a merger, they were reminded that the road to finalizing the idea still had a few more steps.   In addition, they still had some room for improvement in communicating effectively and being more willing to provide feedback when things didn’t go 100% smoothly.

Ed and Katrina decided to have a meeting to discuss a strategy for next steps in how to progress their two businesses working together.   One of the most important needs for Katrina was to make sure Ed and his team were comfortable working with her team members.  In addition, she could use some extra experience for the area of project management. Ed and Katrina came up with some ideas on how each team member could collaborate more with team members in the other business.   They picked a few key upcoming projects and scheduled some time where the team would come to Katrina’s office to work together.   This was also a good opportunity for Ed’s senior project manager to work with Katrina’s and provide some helpful feedback on their project management practices.

Ed and Katrina also decided to start having a weekly meeting each Monday to discuss some of the key happenings for each of their businesses for the upcoming week.   This gave each owner a chance to see how the other makes decisions and approaches the work needed to be done for their business.   It also allowed the opportunity to provide some input and provide any feedback of what they observe from week to week.

In addition to meeting on a consistent basis, they took time to discuss their personality traits and how they approach various situations.   Katrina is not one to hide her feelings and likes to make decisions quickly.  While Ed is very deliberate and prefers to take time to think through all the possible options.  They discussed different ways they could play off of each other’s strengths and weaknesses to maximize their collective partnership.  This would prove very effective down the road when it came to tough business decisions.

In order to further capitalize on new business opportunities, Katrina and Ed also started to make it a point to include each other on their new business pitches.   This allowed Ed and Katrina to identify opportunities early in the sales process that they could educate the client on and subsequently expand the overall size of the project.

Katrina and Ed feel great about their new plan.  They are happy to be moving forward and comforted in not needing to rush a good situation.   While they realize there is more work to do, they know they are one step closer to a prosperous partnership.

Decision Making and Planning

We all make decisions differently. Our experiences, our temperament, and our beliefs determine how we will approach different situations.   How we even perceive various situations can be very diverse based upon different personalities.    A very important factor when working together to run a business is to understand the nuances of the other person and ultimately be able to place yourself in their shoes in certain moments.   This can help avoid contempt and blame in situations while you may disagree, you can at least evaluate if one side or the other might have a better perspective based upon their personality.

When it comes to making big business decisions and putting something you really care about on the line.  Something you started from nothing.  You’re going to want to make sure you can do this in a healthy manner with your potential future business partner.   Finding different ways to practice and evaluate how the other makes decisions can go along way to providing comfort and creating a solid foundation of communication.

Team Integration

Team integration is often an overlooked component when it comes to mergers.   Whether it’s the perceived complexities, timing issues, or other complication, the importance of this step can’t be stressed enough.

Integrating team members prior to making the merger official most importantly makes team members more comfortable.   They get buy-in before they feel they are committed.  It also creates an opportunity begin the formation of positive working relationships prior to any sense of feeling they might need to compete or find their own role at risk.   It also gives a preview of dynamics that may need to be adjusted one the merger occurred.  For the owners, it provides more insight of what changes may need to be made prior to or after

Deepen the Interactions
The day to day focus for the partnership is still to keep it a partnership, albeit a more integrated one.  However, in order to further explore the connection points between the two businesses, it is necessary at this step to find more ways to connect.   This includes collaborating on new business pitches, operations planning, team member collaboration and even growth strategies for the collective unit.  Finding ways to work

Phase Three:  Determine the Future

Phase Four: Due Diligence

Phase Five: Set in Stone