Seven Steps to a Successful Merger or Acquisition:

The key to success is to make sure:

1) That the operational fit exists between both companies. Are core competencies, cultures and visions compatible?

2) Future profitability is made on the buy. Two rules need to be emblazoned on your brain. First, do not overpay. If you do, you are jeopardizing future profits. Second, do not put into place a deal structure that could seal destruction based on performance. To sum it up, "Do not overpay or walk away." The major problems include a weak negotiation process resulting in over valuing what is being purchased.

3) Too much debt could spell doom. Analyze debt service based on what could happen and not on overstated projections. Will the deal destroy shareholder value?

4) Focus first on sales, customers, and marketing, not on making cuts. Realize the number one stakeholder in the deal is really the customer. Make sure customers/clients are kept informed all the way down the line. Leaving them out of the process means that they could walk away. Remember that in 70 percent of the companies, the constraint is revenue or market driven. Ramping up sales with existing resources means that existing resources will have to become more productive. If sales were to seriously drop-off after the takeover, means that due diligence, communications with existing customers, and management style were extremely flawed.

5) Prevent a clash of cultures. Strategy is important. The implemented strategy has to work. The most important part of the merger or acquisition are the employees. The point is not to cause a rebellion. Not changing the culture immediately may be the best policy. Remember there are primarily two types of change, incremental and disruptive. In this type of an environment, incremental changes work best. Not that there isn't a place for disruptive change that provides a leapfrog outcome. The objective is to keep the people you need the most from bailing out.

6) Communicate. There are two schools of thought on change initiatives. The first school, "the by the numbers school", is purely financial in making changes. Productivity is gauged by the numbers and cuts are made along with processes to improve productivity. This process works for a while, because of fear, but in the long term normally fails. The second school, "the team consensus school, says that the team can find the cure to the company's ills, and this too can work for a short time. What needs to be done is to combine the two schools and turn them into a constraint hunting party. Communication is what needs to happen so that if required the people left standing will be incentivized with a future.

7) Integration approach - planning is key. If integration is not well planned out in detail with mapping during the due diligence process, there is a high probability of failure. Realize that most due diligence does not get feedback from the merger or takeover candidates employees and management. That is a major problem.