As president of First Transit Inc., Mike Murray was filled with
excitement and anticipation when the acquisition of Laidlaw
International Inc. was completed in October 2007.
“For years, you’re competitors, and then suddenly you’re going
to become one,” Murray says. “We’re going to get the opportunity to find out the best practices of both businesses, merge those
together and become even better.”
Laidlaw Transit joined with First Transit, the more than $700
million public transit division of FirstGroup America plc, the
largest school bus operator and bus contractor in the United
States. While this wasn’t First Transit’s first acquisition experience, it was certainly the largest.
And while the merger was exciting, it also presented Murray
with a series of challenges to integrate the two companies into
one cohesive unit. Integrating a new company into another is
not an easy task, especially when the companies are large and
have years of history.
The first step to a successful integration is making sure you
are acquiring the right company to begin with. After that,
Murray had to work to put a team in place, representing interests from both companies, unify that team so it could create
common goals, and then communicate those new goals and
expectations to his 13,000 employees and get them to work
with Laidlaw’s employees.
Choose wisely
Finding the right company to acquire takes time. It needs to
be the right time for both companies to go through an acquisition, and the company must meet certain specifications you
put in place.
“It’s like any marriage,” Murray says. “It takes two parties to
understand when the right time is.”
Your plan should lay out the markets you want to be in, how
quickly you want to grow and the types of companies you want
to acquire. First Transit targeted companies within its core competencies of public transportation services, and then looked to
see if they were a strategic fit.
You also need to determine if you want to buy an existing business or bid on a new one, if there will be enhanced value by purchasing a new business, if there will be a combined cost savings,
and if you will be able to deliver the service with more efficiencies
and a better cost base.
One of the biggest challenges for First Transit was having to
wait seven months through an antitrust review. There were
strict limitations on what First Transit and Laidlaw could discuss, and they could not say a lot until the transaction closed.
“That period was one of great anticipation and, for some,
anxiety,” Murray says. “The meat and potatoes take place after
you close. That’s when you get to jump in and see all the
details you were dying to know for months.”
During this period, First Transit set up integration teams for
every department to plan and set goals for how Laidlaw would
be integrated into the company and how each department
would run once the acquisition took place. Murray says
employees inventoried what was already in the department, identified staffing needs in both companies separately, and
then what the needs would be once the companies merged.
“Laced throughout it was a communication plan, so that
once the curtain dropped and we were allowed to close, we
could communicate with our labor unions, employees, customers and the marketplace so we could provide assurances
and some transparency,” he says.
Setting up integration teams and working ahead makes
employees an important part of the process.
“Rather than just dictating to people the way they are going to
do things, it fosters an environment where they are participants, that they have meaningful input, and that they are a
stakeholder,” Murray says. “They’re not just giving up something from the past; they get to personally invest in the future of
the company. It helps create the watershed experience of transitioning to a new, unified company.”
Unify the leadership
While an acquisition is an exciting time, it’s also one of serious change for each company to begin to integrate into one.
“You’re going to go from day-to-day operational management
and keep that going, but also enter a world of serious change
management,” Murray says. “That adds a whole layer of stress
to your organization that has to be managed through.”
One of the biggest projects after an acquisition is to assess
the leadership teams to merge them into one senior team.
Assessment took place through simply hearing about employees’ reputations, reviewing employment records and talking
with employees.
“Just sitting down, interviewing people and determining, ‘Are
they willing to relocate? Are they willing to accept a job that
might be different than the one they held? Are the wage scales
harmonized? Would they be vying for jobs with the same pay
and bonus structure?’” Murray says.
One of the biggest fears of employees is that their interests
would not be appropriately represented on the leadership
team, and the team would be made up primarily of employees
from one company. Three of Murray’s eight direct reports are
from Laidlaw, while the rest are from First Transit, and 15 of
the 24 employees in leadership positions at the regional level
are from Laidlaw.
After the team is assembled, look at company goals and
practices and begin to build a central set of values and goals.
Meet constantly and begin to learn what the business cares
about and what customers and shareholders expect.
There were some fundamentals that were nonnegotiable for
First Transit during this process, such as the pillars of its safety program. The team then began reviewing the disciplines of
both companies, side by side, and selecting the best practices
that emerged that will help the company grow and will ultimately become some of the new goals.
Murray says it’s important that this goal-setting process is collaborative, so ideas from both companies are included, but ultimately, you need to make the decision.
“You collaborate to a point, but when it comes time to make
a decision, you show people the compelling reasons for the
decision and motivate them to follow,” he says.
Focus on communication
Following the closing of the deal, Murray has spent a lot of his
time traveling to Laidlaw locations to meet with employees and
communicate these new goals. Taking the time to meet personally with these groups humanizes the business.
“There’s no substitute for human beings meeting each other to
see that they are experienced, good-hearted people who care
about the business and have the same values,” Murray says.
He says it’s also important to meet with customers and
answer their questions. Customers were primarily concerned
about their service remaining the same.
“They need some assurance that you’re not going to come in
and wreck the service they’re getting, and also signal to them
what lies in the future and the benefits,” he says.
You learn a lot by getting out and meeting with people.
“We get to see, feel and touch how they’ve been doing business, and there’s no substitute for that,” he says. “You cannot sit
in a corporate ivory tower and understand without getting out
in the field and seeing and touching it yourself.”
Communication is important, and it’s better to overcommunicate than undercommunicate in the beginning, but methods
need to change after the initial steps are put in place.
“The challenge is, after everything settles down and you’re up
and running normally, that you develop effective ways of communicating on an ongoing basis,” Murray says.
He made conference calls so employees heard directly from
him and senior leadership and also used electronic communication. The company also put together a management tool kit with
a list of frequently asked questions and information regarding
the new organization.
“You’re never going to be perfect, there’s always going to be
some level of anticipation, but the main thing is that people
want to know what’s going on,” Murray says. “Do they feel
informed? Do they feel like the person speaking to them is honest and straightforward? And ultimately finding out what’s
going to happen to me. That’s what people are most concerned
about.”
Respect is also an important piece of an acquisition.
“We have to treat everyone with tremendous respect,”
Murray says. “Treat the legacy of the company, the founders,
the brand and the people with the utmost respect, just as you
would want to be treated.
“You have to set the example and that this is a fundamental
value. Convince your management team that this is core to
what you believe in, and the expectation is that everyone
behaves in alignment with these values.”
Employees also need to learn the new culture. Get people to
work together so they get to know each other and learn to
work as a team.
“It’s exciting to have all these new teammates and to be working together,” Murray says. “It’s a process that evolves, and it
takes at least three to six months to have everyone’s head
squared away with what it means to be on this new team
together.”
However, there may be employees who no longer feel like
they fit into the organization. Be honest and straightforward,
and let them know where they stand in the new company.
“It’s standing in front of a group and saying, ‘I know you’re worried but understand that we care about each of you,’” Murray says.
“‘Having a sense of anxiety and anticipation is natural, but we are
going to keep you informed every step of the way.’
“If you set the tone that you want to hear from them, and your
team communicates that way, people feel free to talk. Those
people who may be troubled, you either find out directly from
them or from colleagues. Talk to these people and give them
encouragement.”
There are employees you will need temporarily to help with
certain integration projects. Give these employees incentives
to stay through a certain date but understand that they will be
looking for new jobs at the same time. There are other employees whose jobs simply will not exist in the new organization,
so they must be let go.
“There’s a severance arrangement, and you communicate
that, so it’s known to them and they understand it,” he says.
“It’s not fun, but you’ve at least taken care of them and given
them a start.”
There are also employees who simply cannot handle the
change. Murray says these employees most likely will leave on
their own within 12 to 18 months following the change. If they
don’t, tell them it’s either not working out or find them another
position where they feel more secure.
“Some people see change as an exciting time, but there are
others who can’t handle that and want to leave,” Murray says.
Murray says taking time to find the right business and then
integrating both companies, which is still taking place, has
helped First Transit become more competitive and innovative in
its market and, hopefully, the market leader in the future.
“Use every level of communication you can to assure a
smooth integration, and the other thing I would bolt onto communication is respect,” he says.
HOW TO REACH: First Transit Inc., (866) 244-6383 or www.firsttransit.com
