It's been more than a year since my old firm, the Monitor Group, based in McLean, Va., combined with Savant Capital Management in Rockford, Ill. I'm frequently asked, of course, how well the merger is faring. As with any major change, there have been some surprises.

For many of you, the possibility of merging with or acquiring another firm or practice is very real. The more you know going into a deal, the more likely there will be a good outcome for all, so I'll share some unexpected issues that our combined company has dealt with in the past year.

Before we started our integration, we engaged a consulting team from ActiFi, which developed a sophisticated, spreadsheetlike chart of tasks - detailing who, what and when for each.

At first, there were hundreds of individual assignments; the list seemed overwhelming and even nitpicky. Yet as it turned out, the ActiFi process improved our integration efficiency by keeping everyone involved and on track, as tasks were completed in an orderly sequence.

Once assignments were identified, the consultants provided little help on how to get them done. That was all right, ultimately, because the "how" was our responsibility - but if we had known how to do some of the tasks, we would have been even more efficient.

The consultants' engagement challenged us to set a somewhat arbitrary completion schedule. In retrospect, we didn't have a complete understanding of the effort involved in some of the larger and more complex tasks. As we assigned target dates for completion, pressure to finish on time was created, and this inevitably led to stress and mistakes.

Yet when we hit technical snags, more people got involved. Fortunately, there was no "not invented here" attitude; that was a very positive "aha" for all of us.



If you're contemplating an acquisition or merger, it's very important to consider the cultural fit between organizations. This is a critical issue: Are the people in both organizations on board with the coming changes and extra work?

In our case, almost all of the Monitor Group folks were ready to deal with change; one individual, however, abruptly walked out before the combination. Do not be surprised if members of your supposedly loyal staff quit unexpectedly. Experts in corporate mergers say most employees will either adapt or depart within 18 months of the start of integration.

Even with their positive attitudes, however, many staff members initially wondered if their jobs and pay would remain stable. This created interesting challenges for management. On the one hand, we wanted to assure everyone there would be only incremental changes to duties and responsibilities for at least a year. Even so, we realized that the more quickly staff members adapted to new organizational configurations and systems, the better for everyone.

Our adopt and adapt approach has had some interesting twists. The two firms carried out financial planning and portfolio management somewhat differently, for instance. As we moved to a more centralized back office, we needed to modify job functions more rapidly than initially expected, which caused some angst. But after examining our service offerings to clients, we created a better set of offerings by taking the best practices from both firms; this was received by everyone positively. The Virginia advisors were told their compensation would not change to conform with that of the other advisors for at least a year. Yet after examining the more performance-driven Savant compensation system, they asked to switch more quickly .

The combination of human resources and benefits teams produced changes and a few surprises. Our retirement plans were different, and the combined firm of nearly 100 employees now has more organized and structured job descriptions and levels. One surprise was the difference in health care costs between major metro areas and smaller cities. A second was the pay differential for similar jobs, since the overall cost of living can be 50% higher in major metro areas than in small-metro areas. Plan for these differentials if you are considering combinations in different regions.



Technologically, a priority was information management. A key to your long-term success rests on your ability to efficiently and effectively manage your clients' financial information and activities, including trading and portfolio management, planning and a myriad of ancillary work. Your technology must save you time and effort by being accurate, free of bugs and relatively quick and easy to use.

A large-scale combination instantly exposes any weakness in technology scalability, data transfer from other systems, portfolio management and trading processes, and ease of adaptation for new users. We faced all of these issues - and, seeing them coming, we retained consultants to help us carefully analyze our portfolio management and trading processes. This analysis is leading to changes in processes, procedures, organization and staffing levels.

If your organization is growing incrementally by adding clients one at a time, you may not come up against any urgent need to change anything until there is a major shift in technology across the industry. For those who are contemplating substantial growth, however, it is imperative to think ahead as far as you can. In our case, we are looking at systems that can withstand a 100% increase in client load, whether quickly or over a number of years.

Another area to consider: Getting the right people into the right positions is your ultimate key to success. Whatever your growth trajectory, the best thing you can do for your firm is to diagram your current organization by job function carefully. Then, look out one or two years and ask yourself: How much client growth does that represent? Is it 10%, 20%, 50%?

Next, calculate the jobs or people necessary to handle the increase. How will your organization change? What skills and experience will you need to find or develop? If you are having trouble figuring this out, call in an organizational consultant to help. Consider that all the major custodians and many industry vendors offer support consulting at little or no cost. If they don't have the skill sets you need, they usually know reliable folks you can call on.

We are finishing up the development of an organization design for the next five years that will improve our forecasts for personnel, training, budget and technology substantially. Just as important, it will also serve as a reality check against our goals. Can you really afford the cost and inherent disruptions that go along with your growth plan? If you can, go for it. If you have doubts, consider different growth scenarios thoughtfully.



I'd give both firms A's for effort and B's for implementation. It could have been much worse. Acquisitions involving Fortune 500 corporations have led to spectacular meltdowns, and even well-known firms in our industry have sold off multibillion-dollar acquisitions at a loss. Relative to those mergers, we're in great shape.

Even so, our next combination will be smarter about data transfer, systems integration and timing. We'll build even better teams of outside and inside people to help with projects, and we'll know more about the "how" of critical tasks. We'll communicate more, anticipate concerns better and address issues even before a deal is signed.

To get an A on an exam, you have to prepare for it by knowing the subject matter, the likely questions and the best way to answer. A company combination is like that: You need to prepare by studying the subject and knowing what issues are likely to come up, as well as how to develop answers. When your test comes, will you get an A?



Glenn G. Kautt, CFP, EA, AIFA, is a Financial Planning columnist and vice chairman of Savant Capital Management, based in Rockford, Ill.