FREE online courses on Mergers & Acquisitions - Chapter 6 - Post Merger Integration 

 

We have now reached the fifth and final phase within the merger and acquisition process, integration of the two companies. Up to this point, the process has focused on putting a deal together. Now comes the hard part, making the merger and acquisition work. If we did a good job with due diligence, we should have the foundation for post merger integration. However, despite due diligence, we will need to address a multitude of issues, such as:

 

§         Finalizing a common strategy for the new organization. We need to be careful not to impose one strategy onto the other company since it may not fit.

§         Consolidating duplicative services, such as human resources, finance, legal, etc.

§         Consolidating compensation plans, corporate policies, and other operating procedures.

§         Deciding on what level of integration should take place.

§         Deciding on who will govern the new organization, what authority people will have, etc.

 

It is ironic that in many cases, senior management is actively involved in putting the merger together, but once everything has been finalized, the job of integrating the two companies is dumped on middle level management. Therefore, one of the first things that should happen within post merger integration is for senior management to:

 

• Develop an overall plan for integrating the two companies, including a time frame since synergy values need to be recovered quickly. If synergy values are dependent upon the target's customers, markets, assets, etc., then a fast integration process should be planned. If expected synergies come from strategies and intellectual capital of the target, a more cautious approach to integration may be appropriate.
• Directing and guiding the integration process, establishing governance, and assigning project managers to integration projects.
• Leading change through great communication, bringing people together, resolving issues before they magnify, establishing expectations, etc.

 

Once the two companies announce their merger, an entire set of dynamics goes into motion. Uncertainty and change suddenly impact both companies. Several issues need to be managed to prevent the escape of synergy values.