Ensuring harmonisation post-acquisition

When manufacturing companies merge or a target is acquired, typically an organisation can encounter vast and complex changes post-merger or acquisition (M&A). Many manufacturers operating in the sector today are primarily focused on operational efficiency and compliance of all the business processes. Improvements in quality, efficiency and compliance should lead to an exchange of best practices across the group; therefore, it is important to 'harmonise' this process by promoting a seamless and smooth transition of fusing together the different manufacturing companies' operations and procedures. A list of these may include (but is not exhaustive to) the:

• Culture and values;

• Brand alignment;

• Product development;

• Supply chain management;

• Sales and marketing;

• Customer support services; and

• Inventory management.

What should we harmonise in our businesses post M&A?

In general terms, the harmonisation of the corporate strategy must be considered. The two (or more) business units must ultimately work collaboratively under one brand with synergies between both. M&As within the manufacturing sector can sometimes trigger a period of 'governance chaos' and various processes such as quality management systems may go unnoticed. If companies misalign their quality objective, they may suffer subpar product quality consequently. If third-party managed production lines are used, these too must also be harmonised to ensure that such production lines produce products up to standard with the same quality assurance systems adopted. Some larger manufacturing companies that have multiple research and development teams (in particular, teams in different regions) also need to harmonise systems and ensure that all research data is centralised. Furthermore, data is often stored on technology and computer systems, therefore consideration must be given to harmonise the different software's the companies may use. Finally, internal policies governing things such as employee training, health and safety and disciplinary must all be harmonised to ensure cooperation and compliance post M&A.

How should we harmonise our businesses?

In order to achieve 'harmonisation' it is imperative to plan this pre-M&A. A meeting should be conducted between directors and board members on commencement of the deal to discuss and determine the post-merger integration framework and how the teams will work together. Conducting in depth due diligence can also assist with successful M&A integration as imperative agreements, policies and employee information will be disclosed during this part of the M&A providing the opposing party with evidence of how each manufacturing company operates. Employees from both manufacturing companies represent a key element in the M&A process and any dissatisfaction and attrition among the acquired employees can deem the M&A unsuccessful. Ultimately, communicating effectively, clear and transparently will be essential post M&A to ensure the context is established, expectations are managed, and the new systems and processes are introduced gently; failure to do so poses the risk of losing valuable team members destabilised by the process and runs the risk of widespread disengagement.

What can we do?

Navigating the complexities of harmonisation post M&A requires a deep understanding of M&A dynamics in order to ensure the integration is smooth and to enhance productivity and loyalty of employees, allowing the manufacturing organisation to thrive. Our experienced corporate solicitors are specialists in providing clear and comprehensive advice to manufacturing companies on M&A's, we act on buy-side and sell-side deals of all shapes and sizes and can assist with the drafting and negotiation of such agreements.