So why do so many deals—especially those that appear to offer substantial cost and revenue synergies – produce such disappointing results?
Following a merger, management is under intense pressure to address challenges such as defining integration priorities and quickly identifying and capturing synergies. In addition, special attention has to be paid to addressing cultural change and controlling business risk in the new organization.
What is the best way to quickly realize the strategic objectives of the merger?
What must be integrated quickly and drawn down on synergies?
How to best integrate two different cultures and deal with conflicts between them?
How to retain key talent during and beyond the integration process?
How to keep employees focused on business and customers during the integration process?
A merger that is driven primarily by cost synergies will require a very different approach than on in which revenue growth is the main goal.
In reality, relatively few mergers are exclusively about either consolidation or growth. Most are a complex hybrid of the two. Although the dominant strategic source of value will define the overarching style and speed of the integration, a more granular approach will be required, reflecting the mix of cost and revenue synergies.
It is widely known that roughly half of all mergers and acquisitions (M&As) fail to create shareholder value and that about one-quarter actually destroy it. It is also no secret that there are tried and tested methodologies for successfully integrating companies.
Interpretation of the Process
Companies tend to treat merger integration as a mechanical process that occurs after the deal is done.
Underestimate the Complexity
Most companies underestimate the complexity of merger integration, and as a result often make two key mistakes:
Embrace the Change
Executives assume that logic and facts will win the day: communicate the strategic rationale of the merger and most employees will see the light and throw their weight behind it.
But integration is quintessentially about change, and change is an intensely personal and emotional experience.
Successfully executing integration requires best-practice management in time compression, especially when cost synergies are paramount. And this demands not only topflight senior leadership but also a dedicated integration team.
Know Both Sides
Cultural differences between the two companies invariably add to the emotional cauldron, sometimes with explosive effect.
Understanding the cultural differences between the two companies – how their beliefs, behaviors, and expectations differ – is an essential foundation for developing an effective, targeted integration strategy.
How these “softer” human issues are managed is arguably the most decisive factor in the integration.
M&A Integration is part of our Execution Practice Offering
Often times, clients are in need of execution support for a limited time period to ensure a new program or strategy launches effectively. Clients are not interested in hiring full time employees for services that have a near term and finite scope.
TPCG now offers tactical M&A Integration and Manufacturing & Production Support Services to organizations that either merge, acquire other companies or require near term high value wins.