Taking the wheel

Smart Business Cincinnati/Northern Kentucky, Mar 2008 by McKenzie, Meredyth

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 tip some-thing 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 man-aged 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.