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Postcards From the Edge: 7 Things I Learned From My Merger

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It’s been almost exactly a year since I merged my advisory business consulting firm, Angie Herbers Inc., with Kristen Luke’s Wealth Management Marketing Inc. Over the years, I’ve helped many advisors merge their firms, and from those experiences learned a great deal about what works and what doesn’t, but there’s nothing like actually doing it yourself to get a whole new perspective. I’ve learned a great deal about merging two companies in the past year. While the consulting business isn’t exactly like the advisory business, it’s very similar; what’s more, much of what I’ve learned about mergers would apply to any small business. When I look back over the past year, there are a number of things that I would do differently in my next merger. Hopefully, they’ll help you with yours:

1) It’s essentially a new job. No matter how much you believe that your role as owner won’t change in your new firm, it will. The firm that emerges will be vastly different from the two businesses that merged together. Consequently, what needs to be done to run the new business—both at the start and ongoing—will be vastly different as well.

For me, having an equal partner was a new experience, but that was only the beginning. In a small business, the owner spends some of their time on management, but the majority of our efforts are devoted to working with clients and getting new ones. In a larger business, those three functions become separate jobs. That means the owner has to choose which one of their three (and usually quite a few more) former jobs they are now going to focus on. And if the firm is big enough, you won’t actually get to do any of them: you’ll just manage the people who do. Consequently, it’s very important to decide at the beginning which job you’re going to do and which jobs you’re going to give up—and most importantly, whether you can be happy in your new job.

2) It’s a new business. In a merger and a rebrand into a new company (like ours), rather than just an acquisition, there is a level of emotional pain in letting go of what you created and built.  This isn’t your firm anymore: It’s a new company that is yours and your partner’s, and increasingly, the employees’. On one hand, you’re losing your “baby,” and on the other, you’re taking over someone else’s teenager. Let me tell you—it’s a shock to one’s system.

The good news is that it’s also an opportunity to clean house: to jettison the things that weren’t working in your old business and take only the things did that work into the new business. It’s a real benefit, but to get the most out of it, you need to do some difficult things: Be very honest about how things were really working in your old business and deal with your resulting vulnerability on the things that weren’t so good. If you can’t take a step back to look at your old business objectively, you’re going to bring your old problems into your new business, which can only create much bigger problems. 

3) Accept that all your routines will be broken and your comfort zones lost. Whether we know it or not, at work, we all get into routines in doing our jobs and “comfort zones” with the way we do them. Because this is truly a new job, all that will go out the window. Things will come at you from all directions, you’ll have to figure out how to manage new responsibilities, and you’ll be pushed to the limit in a short time. I wish I could give you a formula to handle it all, but I don’t think there is one: You’ll need to create one for yourself, in your new job. So just accept that this is all normal, do the best you can and have faith that you’ll eventually create a new routine and find a new comfort zone.

4) Don’t sweat the small stuff. When I look back on the things that I was “fighting” for in the beginning of the merger I just shake my head and laugh, while wondering why I was fighting for it. I think part of it is just trying to exert some control over your new environment. But I can tell you, most of it was a waste of time and energy. When you’re creating a new business, it’s not always easy to tell what will be important down the road, but in my experience, 80% of what you think will be important won’t be. So from time to time, make an effort to take a step back and take a hard look at all the things you’re fighting for. A good test to use is what decisions can be easily changed if they don’t work out, and what will you have to live with for long time? Then focus on where the impact will be the greatest.

5) Stand up for what you do well.  In your new environment, you will be challenged—by your partner, your employees, legal, accountants and consultants—about why you do what you do and the way you do it. Both Kristen and I caved on some things that in our hearts we knew were best for us, and later, came back to doing almost all of them. So give yourself some credit: Most of us have been doing what we do for many years, and during that time, we’ve figured out what works best for us. There are always other ways to do anything, but different isn’t necessarily better. If you do decide to change some things, make it a test, not a commitment. And trust that your new partners and employees know what they are doing, too. You can always make changes if problems arise, so try not to create new ones.

6) Listen to your intuition. We had a lot of good ideas in the early days when things were exciting and fun, but as we got into the messy details, we lost sight of many of them. Now, a year later, we are realizing most of those ideas really were the right answers. So, don’t be afraid to go with what you just feel is right. We’ve found that more often than not, it will be the right thing.

7) Don’t keep dead weight.  Mergers inevitably create overlapping jobs among existing employees. It’s human nature to try to make the merger work for everyone involved. We changed job descriptions, moved people around, and even created new positions—all to try to keep our former employees. It rarely worked. The reality is that there won’t be jobs for everyone in the new company. Trying to make it otherwise just creates more problems down the road, and makes employees feel insecure for longer. So, figure out who fits where in the new business, and let the other ones go find jobs where they can make a positive contribution.

To sum up, I’ve learned that the success or failure of a merger largely depends on one’s attitude going in: manage your expectations about how different things will be, trust that you know what you are doing, trust that your partners knows what they are doing, try to look at the big picture and focus on things that will have the biggest impact on the future of your business. Being prepared can make a very challenging experience a whole lot easier when you’ve picked a great partner who also has a great attitude. As I look back, despite all the challenges and opportunities, I feel I have hit the jackpot. Not only have we created the business we set out to create, but I also got blessed with a great partner.