Business Monday

Merger ahead? Evaluate the synergies, and consider these 6 tips

As middle-market business owners take part in the increased M&A activity expected in 2017, they should prioritize two key factors affecting companies post-merger: anticipated synergies and people.

Often, they focus too narrowly on fighting the day-to-day fires so they can get through the mergers and focus too little on planning how to address people and synergies after the mergers are complete. It is easy to bake synergies in Excel spreadsheet models when developing budgets, but not always as easy to take the steps to achieve these projections. The projected synergies help increase business efficiencies and create anticipated value while reducing companies’ overall combined expenses.

This topic always brings to mind a joke I heard from a good client: “What is the difference between synergies in a corporate merger and the Easter bunny?” The answer: “You have a better chance of seeing the Easter bunny.” My experience, however, has confirmed it does not have to be this way. With practical, strategic planning and smart decision-making, synergies and smooth sailing are possible. Success in a merger requires this.

Following is some practical guidance based on our experience working with middle-market business owners involved in mergers.

1. Synergies. In many acquisitions or mergers, synergies can amount to tens of thousands, if not millions, in savings. If these savings are not realized as anticipated, the deals will not be as financially lucrative as expected. I recently watched a company incur high costs that put it in financial trouble because it failed to implement changes outlined in its merger plan. When evaluating synergies, factors to prioritize include costs related to real estate, personnel, clients and suppliers. Considerations include:

2. Real estate. Should you have overlapping or redundant real estate, such as several warehouses in the same area? How do you decide whether and how to establish your corporate headquarters, integrate or transition? Having dual headquarters rarely works, so you have to make choices. It is important to pick the right location from a cost, efficiency and convenience standpoint.

3. Personnel. Human resources issues in mergers are very important in the overall success of a deal. If you have two CEOs and other duplicative personnel, how do you decide which executives to keep? Many deals have died because the companies merging could not agree who would serve as CEO and lead the combined company. Moreover, the number of people and their locations must be evaluated. You must pick the best people from each company and be sensitive to those you let go.

4. Clients. How do you best communicate the merger news and minimize any negative impacts of the merger on your clients who might want to continue working with employees and systems that might no longer be around after the merger? Which clients do you keep, and which should you eliminate? Does the combination create client conflicts that could cost you business? If you expect the merger will enable you to increase sales or revenues by expanding the suite of products or services you sell your current customers, how can you begin selling the new offerings most quickly?

5. Suppliers. Should you keep all or some of each other’s suppliers, merge them for economies of scale, or otherwise leverage them? Will higher volumes enable you to negotiate better pricing?

6. People. One of the main challenges is making the right decisions about people. Retaining the right employees in the right roles is crucial. As Jim Collins asks in his book “Good to Great”: Do you have the right people in the right seats on the bus? In some cases, when employees hear of imminent mergers through the grapevine, they become concerned about their job security and begin to explore employment elsewhere. Others might lose their focus and dedication when they learn their employment will eventually end and go to work just to collect the paycheck. Incentives can help mitigate these problems.

Anticipating and addressing these and other issues earlier rather than later is best, so you ensure things will unfold on your terms and in a manner that you can better control. Develop a plan and a time line or things will not happen when and how you want.

Recognizing that developing the right plans is a time-consuming task requiring specialized knowledge and skill, some business owners rely on coaches or other experts. Others do it on their own or with their existing teams. Whatever you decide, keep in mind strategic planning is critical to properly identify and integrate the best of what every company in the merger has to offer and maximize your success.

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies. He may be reached via email at or via LinkedIn at His website is: