Companies spend more than $2 trillion on acquisitions every year, yet many acquisitions ultimately fall short of expectations. There are several reasons why a transaction may not turn out as planned, but oftentimes the culprit is poor post-closing integration. While most transactions are given a great deal of attention until the day of closing, the same degree of attention doesn't always continue past the closing date to include a post-closing action plan.

How can an M&A playbook help?

M&A playbooks can dramatically help companies reach their transactional goals, especially corporations that routinely engage in M&A transactions. An M&A playbook is effectively a set of best practices developed by a company to guide their internal teams through and after closing a complex transaction. It can assist groups involved in the due diligence process to identify issues that matter most to the company; it can set out lessons learned by a company from previous transactions; and it can help coordinate company efforts in identifying potential post-closing issues.

What is included in an M&A playbook?

M&A playbooks may include a set of tools, templates and processes covering a variety of areas including:

  • Organization structure: determining how to migrate different management structures into a single management team.
  • Human resources: determining the impact of a transaction on employee selection and retention.
  • Business processes: determining the critical process of the company and the target company.
  • Data management: determining how to manage the redundancies created by merging of two systems and how integrate the data and data systems.

From a legal perspective, the company's M&A playbook could outline topics such as the following:

  • Role of legal counsel: determining how and where to engage legal counsel. If there is an in-house legal department, determining the division of responsibilities between in-house counsel and outside counsel.
  • Policies: determining which key governance and operating policies require integration.
  • Contract management: determining how to manage contractual obligations and leverage favourable terms.
  • Legal entity structure and legal compliance: determining how to change the legal structure of the newly merged or acquired company.
  • List of disclosure documents: determining the list of legal memos or reports to be delivered to the board and the due diligence to be conducted.

M&A playbooks assist in managing expectations of various stakeholders and establishing a cross-functional leadership team focused on post-closing integration. While terms of a playbook should be modified to suit the needs of each transaction, arriving at a consensus around general issues could lead to higher success rates in M&A transactions.

A note of caution

While a M&A playbook may provide a helpful roadmap to assist stakeholders in navigating a transaction in light of a company's strategic and financial goals, a playbook is not a panacea. All transactions have certain nuances which cannot be planned for or dealt with in advance, so while a playbook may set out helpful transactional guidelines, there is no cookie-cutter approach to M&A.

The author would like to thank Shreya Tekriwal, Articling Student, for her assistance in preparing this legal update.

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