Outsourcing integration management led to measurable impact
While a strategic merger can be a simple solution to increase a company’s revenue and broaden its capabilities, the integration process is often complicated. Some companies find great success and growth post-merger while others fail to meet expectations. Industry experts estimate that between 70% and 80% of all M&A integration projects fall short of delivering anticipated value, which is why many companies turn to an advisory firm to help ensure a smooth transition, especially for bigger investments when stakes are high. However, for smaller-sized acquisitions, often referred to as add-ons or tuck-ins, how can outsourcing integration management be made economically feasible to maintain transaction value?
This was the dilemma facing a private equity-owned platform company about to close on a smaller-sized deal, under $10 million in revenue, in the health care delivery space. The company was a leading SaaS—software as a service—provider of human capital solutions to the long-term care market, catering to the workforce needs of senior care providers at assisted living facilities, home health agencies and the like. Its cloud-based, intuitive software and technology services designed to manage the employee experience were limited to post-hire needs, such as scheduling, engagement and training. By merging with the target company—a niche SaaS applicant tracking and background check provider focused on emergency medical services—the spectrum of offerings would broaden to encompass the pre-employment experience, including candidate sourcing, screening and hiring.
The acquisition would deepen the value of the company’s comprehensive offerings to its existing clients, thereby strengthening its leadership position in the marketplace, and extensive due diligence confirmed the target was an excellent match. Still, a successful merger was dependent upon an effective integration, and while the acquirer’s executive team had prior M&A experience, it was unfamiliar territory to most of the organization, as this was its first acquisition. Despite it being a smaller sized deal, the business requirements were rather complex due to the widespread impact across all functional areas of the organization, including sales, marketing, product management, engineering, finance, IT, human resources and customer success.
The executive team had two choices: take on the burden of executing internally or bring in a trusted third party to help. Because of RSM’s relationship with the PE portfolio, and its deep M&A experience in the middle market, the firm was given the opportunity to propose a solution for separation and integration management that would justify the investment.