4 key strategies to M&A integration success

In the fast-paced world of business, mergers and acquisitions (M&A) are the engines driving growth and innovation.

The current M&A landscape is mixed, shaped by evolving market conditions and the pursuit of strategic advantages. Although deal volumes are down 25% compared to the first half of 2023, the underlying drivers of M&A — such as strategic growth, new product lines, new markets technological advancements, regulatory changes and the quest for market leadership — continue to fuel activity across sectors like healthcare, real estate and insurance.

Within this context, the insurance industry offers a good example of how the principles of successful M&A apply universally. Insurance, which is fundamentally a people-centric business, underscores the importance of aligning cultures, integrating operations and leveraging synergies when acquiring other firms. I believe the lessons from the insurance industry's approach resonate across all industries, highlighting the necessity of understanding and valuing human capital in every transaction.

Top tips for integrating your acquisitions in 2024 and beyond
Successful acquisitions are built on a foundation of mutual respect, shared vision and the effective integration of diverse talents and expertise. Here are four key takeaways that boost M&A integration:

1. Culture is paramount
Culture should be a make-or-break factor in any acquisition. When considering a purchase, it's essential to assess whether the culture aligns with your own. Our management philosophy is built on two pillars: employee sentiment and customer satisfaction. People are the essence of culture.

When acquiring a business, ensure the company is comparable and additive to the culture, never subtracting from it. We identify the most important people tied to client relationships, ensuring they remain part of the team, and conversely look for redundancies in back-office support and corporate functions to streamline operations. The integration of physical offices also plays a role, especially in a post-COVID-19 world where hybrid and virtual work models are more prevalent.

The key takeaway: Never proceed with an acquisition if the culture isn't a good fit.

2. Expect delays and additional costs
The art of integration is mostly about people, which means things can change quickly and unexpectedly. Be realistic with the amount of time and cost an integration project will consume. For this reason, it would be prudent to give yourself a cushion.

One major aspect of integration is the alignment of systems. Choosing the right system, transitioning from legacy systems and training new employees on these systems are critical steps that impact both time and cost. Often, the acquired company's systems are outdated, necessitating a comprehensive plan for migration and integration. The goal is to operate with as few systems as possible, ensuring smooth transition, operations and future growth.

3. Build a critical mass, a stronger sum, or fill in gaps in capabilities
Every acquisition serves a different purpose. Some acquisitions are made to gain critical mass, where the combined entity is stronger than the sum of its parts. Others are strategic, filling gaps in our service offerings or bringing in new capabilities.

The foundation of a successful integration is a clear growth strategy. How will the new acquisition contribute to overall growth — whether by cross-selling, introducing new products or leveraging existing client contracts? For example, if the acquired business has older employees, we need a succession plan and we must train younger staff to ensure continuity and strong client relationships. Additionally, understanding the timeline for the owner's involvement post-acquisition and planning for their eventual retirement is essential. Evaluating these factors helps ensure that the acquisition drives growth.

For example, when we acquired an employee benefits (EB) firm, it not only increased our benefits profile but also brought in a leader who could drive our EB strategy forward. It's important to evaluate each acquisition's growth potential, whether through cross-selling, introducing new products or leveraging existing client contracts. The right acquisition can propel your business into new strategic directions.

4. Be prepared to pivot
No acquisition is ever perfect, and there will always be unforeseen challenges. The key is to identify issues early and find solutions that minimize disruption for both employees and clients. Integration is dynamic and ever-evolving, with unexpected hurdles that require quick thinking and adaptability.

In a people-driven business like insurance, it's necessary to remain flexible and ready to pivot as needed. The entrepreneurial spirit of making lemonade out of lemons is vital — failure is never an option.

Prioritize people for acquisition success
Ultimately, successful acquisitions hinge on understanding and valuing people, preparing for the unexpected and continuously evolving your integration strategy. As M&A deal volume is projected to increase by 20% before the end of year, many CEOs know deal-making activity is key to achieving their growth goals in 2025 and beyond. Whether it be a tech acquisition, folding in a promising start-up or adding production capabilities to an existing tool set, M&A has the power to both take your business to the next level and simultaneously transform it into something totally new — when you do integration well.