Integration 101: How to Maximize Value After an Acquisition
Updated on April 8, 2023
Buying an online business to integrate into your existing business or portfolio is a great way to quickly gain market share.
The main benefits of integration come from the powerful synergies you can create between businesses.
The concept of synergy is often described as 1+1=3. The idea is that the value and output of two businesses combined will be greater than the sum of the separate individual parts.
But post-acquisition integration isn’t always smooth sailing. The process of merging a new business into your existing operations can feel like trying to fit a square peg into a round hole. It requires a lot of effort and adjustment to make it work.
Luckily, we’re here to help. In this article, we’ll take a closer look at integrations, and explore the critical points of failure you need to address to ensure a successful post-acquisition integration.
What Is Integration?
Integration is the process of merging a newly acquired business into an existing business or portfolio.
This can give you access to new markets, you gain access to a new customer base, and it can save costs as it allows you to share resources across multiple businesses.
Let’s take a look at the different types of integrations:
Horizontal Integration
Horizontal integration is the process of acquiring another business that operates in the same industry and offers similar products or services to your existing business.
For example, you may own an eCommerce business that sells dog food and buy a similar business that sells cat food to expand your product offerings and appeal to a wider range of pet owners.
Vertical Integration
Vertical integration refers to when a business acquires another business that operates at a different stage of the supply chain.
For example, if you own an affiliate site, you might buy a video production company to control the production of your videos and increase your video offerings.
Forward Integration
Forward integration is where a business acquires another business that operates downstream in the supply chain.
A good example of this is an online retailer acquiring a delivery company. This allows them to take control of their fulfillment and ensure timely and efficient delivery of their products to customers.
Backward Integration
Backward integration is when a business acquires another business that operates upstream in the supply chain.
In other words, the acquiring business seeks to own or control the suppliers or manufacturers of the raw materials or components that are needed for its products or services.
For example, an online electronics retailer could buy a company that produces computer components to ensure a reliable supply chain for its products.
Conglomeration Integration
Conglomerate integration, also known as diversified integration, refers to the acquisition of another business that operates in a completely different industry or business line from your existing business.
For example, you might own an Amazon KDP business specializing in romance novels, then buy an eCommerce store selling high-end furniture.
The goal of conglomerate integration is to diversify your portfolio and reduce risk by expanding into unrelated business areas.
The Benefits of Online Business Integration
Acquisition integration can provide several benefits to online businesses.
One of the main advantages is the ability to increase your market share. It allows you to get a bigger piece of the pie.
Acquiring another business gives you instant access to new markets and helps you expand your customer base. This increases your authority and brand recognition within your niche. It also allows you to diversify your income streams, shielding you from seasonality or downturns in the market.
Integration can also streamline your operations, reduce redundancies, and save costs by making use of economies of scale.
Economies of scale is a fancy term that means the more you make of something, the cheaper it gets. For example, imagine you want to make a cake. If you just need to make one cake, you have to buy all the ingredients in small amounts. But if you want to make 10 cakes, you can buy the ingredients in larger amounts, and it will be cheaper per cake because you’re buying in bulk.
This works for businesses too. By integrating two or more businesses, you can share resources, knowledge, and tools across the various businesses, saving you time and money.
But while integration is a great way to level up your entrepreneurial ambitions, achieving a successful integration can be tricky.
The Challenges of a Successful Post-acquisition Integration
The main goal of integrating a new business into your portfolio is to create cost, resource, and revenue synergies that will ultimately lead to increased profits and business growth.
Your two businesses combined should be more efficient, profitable, and powerful than they were alone.
But figuring out how to make two separate entities operate in harmony is not as simple as jamming the businesses together like pieces of Lego. In fact, a study by Harvard Business Review revealed that 70%- 90% of all integration acquisitions end in failure.
Billions of dollars are lost every year because entrepreneurs underestimate the complexities of integrating two different businesses.
There are many reasons why integrations can fail. Some common reasons include cultural clashes between the merging companies, a lack of clear communication and leadership, differences in management styles and processes, and inadequate planning and preparation.
Additionally, the integration may not be able to deliver the expected synergies.
So with that in mind, let’s go over the key areas you need to focus on to achieve a successful integration.
Preparing for an Integration
When it comes to creating an integration strategy, the sooner you start planning, the better.
The first thing you need to do is define your goals. What did you hope to achieve by buying the new business? What key synergies will shape the success of the integration?
Once you’ve identified what you hope to achieve, you’ll have a clearer picture of what you need to address to get there.
Additionally, it’s important to ask yourself,
“Do I want this new business to run independently from the other businesses within my portfolio? Or, do I want to merge this business with one of my existing businesses to form one business?”
The answer to these questions will shape how you need to approach the integration process.
If you want your newly acquired business to run independently, it may share resources and knowledge with your other businesses, but its operational structure will likely remain unchanged.
Merging the acquired business with another business, on the other hand, will create a lot of redundancies that will need to be addressed. Your main focus at this point should be to identify areas of overlap and potential synergies.
Speed is also of the essence. According to a study by McKinsey, integrations are almost three times more likely to succeed, and deliver 40% greater returns, if a company meets its integration goals within 24 months after merging with another company.
With that in mind, let’s take a look at the key areas of integration you should focus your time on.
Employee Integration
Integrating a business is like putting together a puzzle, but instead of a picture, you’re trying to create a cohesive team out of two previously separate entities.
That’s where strong leadership comes in – you need someone to guide the process and make sure all the right pieces are in place.
Identifying leaders from both businesses is essential. But, it’s not just about having the right people, it’s about recognizing the best talent. When merging two businesses, many positions will overlap, so identifying the MVPs and A-gamers from both sides is critical.
The integration process can be a source of anxiety for your team, so it’s essential to maintain a healthy company culture. By keeping communication open and transparent with your staff, you can identify influencers who can drive synergies across the company.
Of course, keeping everyone in the loop throughout the integration process is easier said than done. Communication challenges can arise both during the planning stage and post-closing, so setting clear communication goals and delivering timely and honest information is vital.
And remember, when it comes to communication, weekly updates are better than monthly. Regular briefs will keep everyone informed and minimize insecurities.
By involving employees in the integration process and providing training and support, you can help minimize disruption and ensure a successful merger or acquisition.
Operational Integration
When two companies merge, it’s like a delicate dance to combine their day-to-day operations into one seamless operation.
These operations can include various aspects of the business, such as supply chain management, production processes, IT systems, human resources policies and procedures, accounting and financial reporting, sales and marketing strategies, and customer service operations.
You need to identify how the strengths of one business may counteract the weaknesses of another, and how you can leverage economies of scale across the businesses.
Maybe one company has a killer marketing strategy while the other has a superior IT system. Combining these strengths can create a more efficient and effective business.
What you don’t want is for both businesses to suffer as a result of a poorly executed integration.
If the customer service teams of the merged company aren’t integrated properly, for example, customers may receive conflicting information or experience delays in resolving their issues. This can lead to frustration, a loss of trust, and ultimately a loss of business.
The key to a successful operational integration is to identify the areas that need to be integrated, cut out what’s unnecessary, and preserve what’s working well.
Maybe one company’s supply chain is a perfect fit for the other’s manufacturing process. By joining forces, they could create a lean, mean production machine.
To ensure that everything goes smoothly, it’s important to establish clear goals, KPIs, and timelines. This will help you stay on track and identify any issues that arise along the way.
Integrating Tools and Resources
Finally, you need to evaluate the software and tools used by both businesses.
The goal is to have both businesses working with the same platforms so that data can be shared easily. Plus, why pay for two licenses when you can pay for one?
The first step is to identify the key tools and resources used by both businesses and assess their compatibility.
When integrating software and data, expect some system downtime and IT issues. Aim to create a plan to integrate these tools and resources in a way that minimizes disruption to the existing systems and workflows.
You should also consider the importance of data security and privacy during the integration process. It’s essential to ensure that sensitive information is protected and that all necessary security measures are put in place.
Finally, it’s essential to have a team in place that is knowledgeable and experienced in both the tools and resources being integrated and the merger process itself. This team should work closely with both businesses to ensure a smooth and successful integration.
Tools to Help You with Post-acquisition Integration
There are several tools and resources you can use to help you integrate your businesses post-acquisition. Here are a few examples:
Project Management Software
Project management software, such as Asana, Trello, or Monday, can help you keep track of tasks, timelines, and team collaboration during the integration process. These tools can also help you manage workflow and deadlines, so everyone knows what needs to be done and when.
Communication Platforms
Communication platforms, such as Slack, can help keep everyone connected and informed during the integration process. These tools can also facilitate collaboration, allowing team members to share files, discuss projects, and stay up-to-date with the latest developments.
Data Integration Tools
Data integration tools, such as Zapier, can help you connect and integrate data from different systems and applications. This can help you consolidate data and streamline processes, making it easier to manage your newly merged business.
M&a Lifecycle Management Solutions
M&A lifecycle management software, such as DealRoom, is designed to help you manage the process of mergers and acquisitions. It provides tools and features that support various stages of the M&A process, from initial planning and due diligence to post-merger integration and ongoing management.
Monitor Progress and Assess Gaps & Overlaps
Once you’ve successfully integrated employees, operations, and tools, the hard part of your integration journey is done. But that doesn’t mean you should become complacent.
As the dust clears and your newly integrated business settles into its foundations, cracks can appear.
That’s why is vital to continually monitor the progress of your integration. This will help you identify potential delays or issues early on and take steps to address them before they become more significant problems.
Assessing gaps and overlaps is also important because it allows you to identify any areas where the post-acquisition integration may not be working as smoothly as expected. For example, there may be redundancies in staffing or duplicated processes that are impacting efficiency and profitability.
Finally, there’s one last thing standing between you and a successful integration; finding a high-quality online business to buy. That’s where we come in.
Register an account and head on over to our marketplace to find the perfect business to suit your needs.
