Many of our insurance clients have struggled to integrate new merger partners effectively and efficiently. Insurance brokers are under tremendous cost pressure, and acquisitions are one way to secure double digit growth. The due diligence has been completed and the merger has closed. Now the hard part starts: integrating systems, tools, processes and organizations into the acquiring firm's operation.

There is no cookie cutter approach

Much of the work depends on the complexity of the acquiring entity's operational and technology blueprint. We have built a methodology that covers every part of an integration, and a thorough analysis of all operational components still has to come before any integration activity. In most cases the acquired agency is smaller and has connected all its systems, tools and processes, while the larger acquiring entity has a more complex structure. That mismatch creates significant challenges during the integration.

Plan on the front end

In our methodology we allocate enough time on the front end, after the due diligence, to plan every part of the implementation strategically and tactically. We believe you have to plan for everything that could go wrong ahead of time, and set plans and processes in advance to avoid costly disruptions. Many mergers fail to deliver the intended results because of unforeseen issues that can't be corrected in time, and that could have been avoided or reduced with proper preparation.

The AMS migration

The biggest challenges surface during the migration from a legacy agency management system (AMS) to the acquiring entity's AMS. Data doesn't convert properly, some data doesn't convert at all and needs manual entry, and financial transactions aren't accounted for accurately. A plan that includes multiple trial data conversions eases these problems. We have used our alliance partner in India to complete a significant amount of the manual cleanup, which reduces the burden on our clients and keeps them focused on serving their clients without interruption.

Bring the people along

Adjusting to a new organization can be hard, especially for the merger partner. Employees have to learn the new systems, processes and tools and still do their day jobs. Many brokers find it helpful to bring on temporary staff to handle some day to day work. Proper planning a few months before the go live date prevents last minute fire drills and unnecessary strain on an already wary organization. Set up a reward bonus pool for a successful go live and integration.

Many clients make the mistake of trying to win over every affected employee and spend too much time and effort on skeptics. In every large change effort, affected employees fall into three groups:

  1. Champions of the initiative, who act as organizational cheerleaders (about 20 to 25% of affected employees)
  2. The silent majority (about 50 to 65%)
  3. Skeptics, who cross their arms and routinely say how silly the initiative is (about 10 to 30%)

Our advice is to support your champions and reward them. Many future leaders have come from the ranks of these champions during large integration efforts. Spend a lot of time on the silent majority, and avoid spending significant time on the skeptics. Peer pressure will bring a large share of them on board.

In closing

Integration can be a very manageable effort. It takes proper planning, solid M&A experience and an experienced guide to complete every activity smoothly. Many mergers fail because onboarding and integration are done on a shoestring budget. As part of due diligence, acquiring organizations should set aside time to plan an effective and efficient integration.

To discuss M&A integration in your business, contact DBV Solutions.

Originally published as "Mergers & Acquisitions Integration" by Erik Davison in The Insurance Research Letter (IRL), May 2016, Vol. 19 No. 5.