Having been through the M&A process myself several times, I fully sympathize with those business leaders who make it through due diligence and sale negotiations and collapse in a chair thinking, Phew, at least the hard part is over! Sadly, however, many well-intentioned mergers and acquisitions stumble at the final hurdle – integration. Failure at this point can do irreparable damage to both organizations.
Not All Integrations Are the Same
As mentioned in Parts 1 and 2 of this series, every M&A deal has its own quirks, so it’s difficult to talk specifics. This is especially true of the integration since the kinds of challenges participants will face depend a lot on how the post-M&A entity (or entities) will operate.
In the broadest terms, there are four “categories” of outcomes:
- The acquired entity will continue operating in its own right with little or no intervention by the new owners.
- One entity will subsume the other.
- Key personnel and desirable assets will migrate to the acquiring company, and the remainder liquidated or let go.
- Both entities will cease to exist in their current forms. Instead, a new hybrid entity will move into the future.
With these categories in mind, let’s look at four key areas of integration.
Integrating People
Integration typically involves more people than any other phase of M&A. Most will have had little say in the decisions that will now profoundly impact their lives. That can result in some “big feelings.”

Begin by informing any staff not already in the loop about the sale before it goes public. This allows them a chance to process the news and prepare to answer questions from clients, vendors, etc. If not everyone will make the transition, expect feelings of fear and resentment. Offering resources to aid displaced employees can ease their immediate concerns; but more importantly, treat them with empathy and respect. If teams will merge, avoid us-versus-them situations and showing favoritism.
For Those Who Remain
Leaders often begin with the meant-to-be-reassuring, Your jobs are safe. (Many agreements include language to this effect; however, such provisions are often unenforceable.) Regardless, expect employees to have the following questions, even if they don’t voice them:
- How long will I have a job? Will it be the same job?
- Will I work with familiar colleagues? Report to the same leader?
- How will our culture and daily routine change?
- What will I gain as far as salary, benefits, opportunities, seniority, etc.? What will I lose?
It’s impossible to answer every question at this point, but keep the lines of communication open. Be honest! I don’t know yet, is better than false reassurance. Remember, too, that what may seem “small things” in the C-suite – dress codes, daycare, leave policies, etc. – are often highly meaningful for the rank-and-file.
Understand also that retaining employees isn’t the same as preserving the culture that governs how they interact with clients and one another. Workplace culture is something to be addressed in its own right as well as being a useful tool for navigating the changes M&A brings.
Finally, keep in mind that no matter how smooth the transition, it’s normal to feel a sense of loss for what was. Allow employees to go through the stages of grief at their own pace.
Process Integration
Typically, a company wants to acquire or merge with another entity because the target business is already successful. It’s common for new owners to assert, We don’t want to change anything right away. Some of them genuinely mean it. Still, change is inevitable when two (or more) organizations try to combine or even coordinate their processes.
One reason for this is that it’s difficult for owners to run different companies in different ways. Attempting to do so adds a degree of complexity to everyday decision-making that employees not immediately involved in those processes may not fully appreciate. Differences between organizations can also breed resentment, especially if one team is perceived as having a “better deal.”

Additionally, company leaders often what to take advantage of economies of scale. This is why Human Resources, Accounting, IT, and Marketing teams are often among the first to feel the impact of integration efforts. Remember, too, that larger companies — those with over 100 employees, for example — may be subject to labor laws and other regulations that smaller concerns haven’t had to deal with.
When making decisions about process integration, keep the following guidelines in mind:
Don’t take commonalities at face value.
When confronted by so many differences, it’s understandable that integration teams look for what companies have in common. Realize, however, that doing the same task doesn’t necessarily mean doing it the same way. As with so many things in life, the devil’s in the details.
Don’t change processes you don’t understand.
This one may seem like a no-brainer, but in the hectic, adrenaline-fueled days of early integration it can be easy to fall into the yeah, yeah, I got it trap. Ideally, integration team members should sit with employees as they work to watch a particular process in action before making any decisions about changes. Be wary of relying solely on what team members say. Individuals with a deep understanding of a process often take shortcuts without realizing it. Additionally, just because someone is good at doing something doesn’t mean they can articulate how they do it effectively.
Don’t automatically side with the larger organization.
In this case, larger may refer to numbers of employees or to revenue generated. It can be tempting to say, but doing it A’s way means disrupting and having to re-train fewer people. But remember, smaller, less well-funded teams often have streamlined processes that make the most of every dollar invested. Adopting (or adapting) those ideas can mean a big bump in the entity’s bottom line as a whole. Try to make impartial, empirical judgments about which way works better — or best of all, find ways to blend best practices from each.
Finally, if two companies are truly merging to form a new entity, don’t miss the opportunity to take a greenfield approach to innovation and operational design.
Integrating Information Systems
Of all the aspects of integration, bringing together two information systems can be the trickiest. This is especially true if proprietary or highly-customized legacy systems are involved — not an uncommon event when dealing with insurance businesses!

Keep in mind that processes shape information systems and are shaped by them in return. Taking a-rip-it-all-out-and-replace-it approach can have consequences that endure long after new hardware and software have been installed. Additionally, IT systems are so fundamental to every task in the modern insurance business that even brief interruptions in access can have a huge impact on productivity and profitability.
Apart from the obvious technological considerations, keep the following in mind as you start tackling IT integration:
Have current maps of the hardware, software, data assets, and access needs for both systems.
Maintaining such maps should be a cornerstone of cybersecurity plans, but their upkeep often gets put on the back-burner while techs deal with more immediate needs. It also helps to include the rationale behind the decision-making process, especially when it comes to access needs.
Have detailed schema for databases and similar formatted data storage systems.
Even two businesses that collect and use the same data may have different field names and formats for such information. Again, making sure that integration teams share and common language and understand the underlying logic for the schema can head off issues.
Have recent backups of all systems and data.
Even the most thought-out plan can have unexpected glitches when it comes to information systems. Be sure you can go back to what you know works before moving forward. If resources allow, run new and old systems in parallel for a while. Yes, it means double-entry for employees; but that inconvenience is minor compared to the problems caused by a major loss or corruption of data.
Don’t introduce new cyber vulnerabilities.
Whenever teams make significant alterations to information systems, it can be easy to disrupt cyber defenses. Additionally, team members are more likely to dismiss system delays and “weirdness” as a result of the changes rather than warning signs of a breach or other compromise.
Be careful not to lock down systems too tightly.
Access control is an important part of any cybersecurity program, but don’t be too quick to lock things down. This is especially important for users moving from a relatively “open” system to a more controlled one. Be sure you truly understand each employee’s access needs rather than assigning generic permissions. You can always adjust access as team members’ new roles become more clearly defined.
Another issue that bears discussion at this point, many larger corporations closely monitor employees’ activity, sometimes down to the keystroke. They do so to ensure cybersecurity and to measure productivity. Workers not used to this level of oversight may be deeply troubled by it, seeing it as a lack of trust. Explaining the reasons for the monitoring and how the data is collected and used can help, but mostly it’s a question of providing reassurance and giving people time to adjust.
The Regulatory Aspects of M&A
Just as integrating information systems requires a strategic approach and extreme care to avoid creating exploitable vulnerabilities, consolidating or redistributing oversight of regulatory needs can also be challenging. This is especially true if one party comes from outside the insurance industry — for example, a technology firm or a venture capital group with minimal hands-on experience with our highly-regulated industry.
Ideally, the due diligence process included a comprehensive compliance review for one or both entities. This audit should include licensing and compliance status as well as foreign corporation business registrations and compliance activities. During the integration phase, leaders need to determine whether the active businesses hold the appropriate credentials to service existing accounts and solicit new ones. Gaps need to be closed and redundancies minimized for optimum efficiency. It is essential to remember that agency insurance licenses connect to the entity’s Federal Employer Identification Number (FEIN) and are NOT transferrable if that number changes. Affiliations and appointments also need to be updated. If key individuals, especially those acting as Designated Responsible Licensed Producers (DRLPs) will not remain with the company, other personnel will need to obtain appropriate licensure. Depending on the state and the individual’s regulatory reputation, this can be a time-consuming process.
Final Thoughts
Ideally, M&A brings two successful organizations — perhaps disparate in size and resources or experts in different, but complementary areas — together to create something greater than the sum of its parts. Moving forward blindly can destroy the very factors that created that success. Likewise, companies that dig in their heels and refuse to make any changes to “the way we’ve always done things” can sabotage a potential growth opportunity. Every merger or acquisition involves aspirations and emotions as much as dollars and cents. Individuals at every level need to keep their eyes, ears, and minds open to new possibilities while showing due respect for the personal and corporate journeys that led to this moment of opportunity.