Begin with the end in mind: Post-completion integration

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I once worked on an M&A deal that took more than a year to complete. While the deal was not inherently complex, it dragged on due to delays in finalizing the details of the transaction agreements for reason beyond my control.

As the deal involved a larger corporation acquiring a stake in a smaller company, there was post-completion integration involved.

The negotiations on various aspects of the deal were protracted primarily because greenlight from various departments within the corporate buyer was required. Although the parties brought up post-completion integration several times during negotiation, the details were not forthcoming. When the parties finally delved into cost allocation and other post-integration details, they realized their expectations were far from aligned. It took a few more months to resolve these issues and finally agree on the provisions in relation to post-completion integration.

In an M&A transaction, it is worth considering post-completion integration early in the process. Some key considerations include:

1.      Will the seller provide transitional services to the target such as HR, payroll, or IT services, until the target is fully integrated into the buyer’s operation?

2.      Alternatively, will the buyer provide shared services to the target, for efficiency and to align the operation of the target with the buyer and its group of companies?

3.      What will be the costs involved and how will the costs be allocated between the parties?

4.      Do the parties need separate agreements to govern transitional or shared services? Some parties include the agreed form of such agreements into the main sale and purchase agreement to lock in the terms.

5.      If the target is charged for the shared services, how will this affect its profitability and any earnout provisions for the seller?

Considering these aspects early on can save time and ensure a smoother transition for the parties and target.


This post first appeared on LinkedIn on 21 September 2023.

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