Integrating two businesses after a merger or an acquisition is becoming even more of a challenge as the pandemic continues to disrupt how businesses operate. The missing piece: personal interaction.
Nine months into the pandemic, as business travel remains restricted and many employees continue to work from home, chances for executives and key employees to meet face-to-face are limited. Even as deals are being struck at a hectic pace, executives say they are striving to figure out how to integrate companies and teams without face-to-face contact.
“Building relationships and culture is very difficult over the computer or the phone,” said Brian Salsberg, head of the integration practice at Ernst & Young LLP, the professional services firm.
Park Place Technologies LLC, a Cleveland-based provider of data-center services, in November purchased Curvature Inc., another information-technology support business. To keep all employees informed of the changes at the company, Park Place now is producing a weekly podcast and hosting virtual town-hall meetings, Chief Executive Chris Adams said.
“The most challenging aspect is assimilating all of our new employees into the Park Place culture when we can’t physically be together,” Mr. Adams said.
Sending little welcome gifts, such as T-Shirts, mugs and posters, to remote employees helps create excitement, said EY’s Mr. Salsberg. Others recommend remote dinners or cocktail hours to bridge the gap. Park Place also is sending surveys to employees, asking for their thoughts on the integration and the companies’ management styles, as well as any questions they might have, Mr. Adams said.
employees can sign up to become buddies of their new colleagues at Workfront, a work-management platform that the software company recently acquired, in a deal that was completed this month. “We are still trying to figure out how to create that connection,” said Amit Ahuja, a vice president at Adobe, adding that “people love” the Buddy program.
U.S. companies have secured approvals and transferred ownership in over 6,450 M&A deals since March 1, roughly when the pandemic led to remote work, Dealogic said. More such deal closings are in the pipeline, including
agreement to acquire
Slack Technologies Inc.
for $27.7 billion, and
S&P Global Inc.’s
plan to buy
IHS Markit Ltd.
for an estimated $44.4 billion.
Once an acquisition is agreed, corporate deal makers have to start laying the foundation for how the companies will work together, even if the deals require regulatory approval and won’t close until later. Advisers say it is crucial for companies to get this part of the puzzle right, as they are often spending hundreds of millions or billions of dollars.
Some of the technical aspects of an integration, such as planning or merging systems, can be done as or more effectively in a remote environment, executives say. But connecting with people, developing a common language and sharing a vision can be much harder.
At S&P Global and IHS Markit, executives from both companies will be leading the integration after the transaction closes, said finance chief
He met with key executives at IHS Markit earlier this year in Connecticut, following Covid-19 guidelines, but the negotiations continued remotely after that. Now, as S&P Global’s and IHS Markit’s management are preparing to reap $480 million in annual cost and $350 million in revenue synergies, they also expect to make some job cuts, while also creating new positions, Mr. Steenbergen said.
Delivering on cost synergies, for example through layoffs, can be particularly hard without face-to-face meetings, said Edward J. Lee, a partner at Kirkland & Ellis LLP, a law firm. “It can be very unsettling for people not to be able to say goodbye,” Mr. Lee said.
Retaining talent is also harder in a remote environment, practitioners say, as the absence of water-cooler conversations and other unscheduled interactions can make people feel disconnected and potentially open to looking for other jobs.
In some cases, though, especially when smaller or younger companies combine, the process can be pretty smooth. Olive Inc., a provider of artificial-intelligence tools for health care that was recently valued at over $1 billion, this month agreed to acquire Verata Health, another startup. The integration is expected to be done in weeks, said Jeremy Friese, the CEO of Verata.
Olive’s employees can work remotely from wherever they want, an option that will be extended to Verata workers. None of the executives have to relocate, and offices won’t be moved. “In a typical transaction, you would have to decide where the headquarters would be, or how many people have to relocate,” Olive CEO Sean Lane said.
For Olive and Verata, it was more important to find out that both companies were using Zoom for their videoconferences. “We have a shared love for certain types of collaboration,” said Ali Byrd, Olive’s CFO.
But integration managers say it is hard to forecast what will happen after the pandemic given the uncertainty over when this extended remote-work period will end and vaccines will be widely available to Americans. Some companies are delaying part of the integration to avoid some of these hurdles, while others, such as Salesforce,
or S&P Global gain a reprieve as they await regulatory approval for their deals.
Semiconductor company Nvidia Corp., which in September agreed to buy Arm Holdings for $40 billion, is already working to prepare the integration, said
the company’s CFO, even though it could take up to 18 months for the deal to get approvals. Nvidia wants to get a headstart in understanding Arm’s culture, Ms. Kress said.
Still, executives worry that their integration efforts may not go far enough.
“We cannot replicate the “Day One” experience in the office,” EY’s Mr. Salsberg said. “It will probably be too early to call these integrations a success until much later,” he said.
Write to Nina Trentmann at [email protected]
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8