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2.8.99  
Making All the Right Postmerger Moves
Now in its eighth acquisition, Razorfish provides a how-to guide


The second in a two-part series

Mergers are like marriages -- the urge to merge sweeps companies up. But making them work long term can be disillusioning for the starry-eyed. Let's assume that you've found the right partner. Your cultures fold seamlessly into one another (see Business Week's Frontier Online, February 5, 1999). The vibe is right. You've agreed on a price. Now what? There are still hundreds of details that can make the difference between a happily integrated team and a bunch of accidental officemates wishing they had never met.

The bottom line in small-company mergers and acquisitions -- where the object is often to acquire a skilled team in a strategic location or field -- is that the new employees must be just as excited about coming to work at the new company as the old -- or they won't stick around. To make them stay, you need a detailed integration plan. Without it, you risk confusion, bruised egos, and a fractured staff.

Razorfish, a New York-based company that provides Web and other digital communications services to such clients as ABC Interactive and discount brokerage Charles Schwab & Co., is in the midst of its eighth acquisition since the start of last year. Razorfish officials say they've learned the hard way what works and what doesn't when two companies become one. Here are a few of the lessons:

Take charge: Jean-Philippe Maheu, who is in charge of integrating Razorfish's acquisitions, says the company learned from its first acquisition -- Avalanche, a smaller competitor in New York -- that it's important to know who runs the new company from the start so you can get on with business. Maheu says Razorfish tried to minimize the initial trauma of the merger by keeping employees' salaries the same and letting everyone hold on to their original titles. "We had two directors and two managers of departments," Maheu says. It sounded like a good idea. But there was too much polite indecision. Now only one manager leads each department. "Clarity is more valuable than not hurting someone's feelings," says Razorfish CEO Jeffrey Dachis.

Paint the old signs over quickly: After Avalanche merged with Razorfish, it took a few months to get rid of the Avalanche brand. When Razorfish bought Tag in Los Angeles and Plastic in San Francisco, Razorfish put its imprimatur on immediately. What may seem deferential to the acquired company's sensibilities, just confuses clients, the company found. "Don't slowly paint over the sign," says Razorfish Chief Scientist Craig Kanarick.

Have a plan: Maheu has since developed 30- and 90-day action plans for acquisitions. Some of the tasks on his list are fairly simple: Make sure on the first day of business under the new marquee everyone at the acquired company has new business cards and new E-mail addresses and the receptionist answers the phone "Razorfish." Kanarick also advises newly married companies to have a party in those first few days so everyone can bond.

Get down to business: Also within 30 days of the acquisition, says Maheu, the newly formed company has to develop a budget, agree on a market strategy, and create a new business-development plan. Kanarick adds that it's crucial to do a staff checkup in the first 30 days: Interview new staff, and send someone from the acquired company to talk to the original staff to help them understand what's going on.

Prune clients and round out staff: The hard stuff kicks in on the 90-day plan: If the acquiree has clients that aren't paying or are otherwise money-losers, the company ditches them or the terms of their deals are changed. Razorfish then creates a staffing plan. Maheu says that to take on bigger projects, smaller, acquired companies need to add people and fill in the holes. The next step is to help them pitch to more substantial clients and to take advantage of the Razorfish name and resources. Len Sellers, who started Plastic, the San Francisco company that Razorfish acquired this past spring, says his company used to handle $100,000 projects. Now, it manages deals worth as much as $1 million for clients such as eBay, the online auction company.

Make the new staff feel important: Merged entities have to worry about retaining their newly acquired employees. One way to do this is to take people from the purchased company and give them positions of power in the joint entity. When Razorfish acquired Avalanche, it used one of Avalanche's founders, Peter Seidler, as a role model. Seidler retained his title of chief creative officer when he came to Razorfish and was given a conspicuous amount of responsibility. Avalanche employees felt that their guy was important. That was key, according to Maheu.

Even so, after the acquisition, some former Avalanche employees sensed that they were not as crucial as they had been at the smaller company. For example, says Kanarick, the best designer in the acquired company may be the No. 4 person in the larger, merged company. Such issues need to be addressed. Seidler says his former team members were assured that they could move up quickly because of growing opportunities at the new joint entity. Some salary adjustments were also made. He says only one person from his 25-person staff left in the past year. That's no small achievement in a job market that offers so many alternatives.

By Sherrie Nachman in New York

Part One: Melding Cultures: No Easy Task When Two Companies Merge
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Part One:
Melding Cultures: No Easy Task When Two Companies Merge

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