“One of the most common misconceptions about post-merger integration is that it can be tacked on to existing day-to-day operations. That’s wishful thinking, and it’s a recipe for unrealized value”
Mergers and acquisitions (M&A) are essential for many businesses’ expansion, but some struggle to add the required value. Particularly, where transactions promise high cost and sales synergies, external factors such as the environment or specific policy regulations can lead to disappointing outcomes. One big reason behind this is that businesses prefer to see post-merger integration as a phase after the transaction is completed.
According to the BCG report on PMI, ‘BCG’s framework for a successful PMI has helped clients capture 9% more value from their M&A deals’. This information states how important it is to take financial and tactical decisions related to post-merger integration before the acquisition is legally executed. Since no two M&A transactions are alike, utilizing the potential of each one involves complex and unusual challenges. One of the most critical aspects of a successful acquisition is identifying and handling the post-merger integration process since it eventually decides whether the agreement will succeed or fail.
A thorough post-integration process will ensure the deal’s overall success while increasing efficiency, reducing risk, and eliminating missing opportunities.
Post-Merger Integration (PMI) is a complicated process. It entails onboarding new hires, implementing financial strategies, planning internal and external relations, and renegotiating contracts, among other items. PMI’s goal is to maintain market stability while avoiding risks and minimizing disruption.
One of the most common misconceptions about post-merger integration is that it can be tacked to existing day-to-day operations. That’s wishful thinking, and it’s a recipe for unrealized value. MergerWare’s framework for a successful PMI has helped clients capture a significant amount of value from their M&A deals.
Since post-merger integrations are often complex and don’t consistently deliver our desired outcomes, MergerWare has tried to develop five critical elements required for a seamless post-merger integration for companies.
Start Planning early
It’s never too early to start thinking about post-merger integration during the transaction process (PMI). When the letter of intent is signed, it is a typical turning point for starting this procedure. On both sides of the deal table, there is a degree of commitment at this stage. Starting a PMI schedule at this point gives you ample time to make sure your financial and strategic goals are aligned with your tactical implementation playbooks. The development of a new content library where primary records can be stored can be one of the first steps towards a seamless PMI process.
Choose the right set of people
PMI progress hinges on identifying the best group of workers to lead the initiative. The first move is to designate an integration team manager formally. This individual should ideally have experience leading similar projects, as experience counts. The integration management officer (IMO) could then start assembling a small group of trustworthy cross-functional representatives to act as the project’s core team. This community will guide the enterprise-wide PMI initiative, keep track of milestone success, and ensure transparency.
Learn to Prioritize
Getting started with the PMI method can be intimidating at first. A long spreadsheet with hundreds of intertwined action objects projected cost and revenue synergies and a set of time-based targets is common. It’s unrealistic to expect to conquer anything on day one, but finding a compromise between “quick gains” and long-term goals will help make the transition more manageable. There are numerous examples of companies implementing the seismic change too early in the PMI phase, with poor results. A more realistic and “bite-sized” solution would save money and a lot of effort, time, and frustration.
Communication is the key
When an agreement is announced, there is a natural sense of uncertainty about how the two organizations will work together. Employees on both sides will undoubtedly be concerned, but key business partners will also share the same ambiguity. Customers, as well as retailers and manufacturers, will have several unanswered queries. Uncertainty within these constituent groups leads to attrition, and in such a situation, the newly merged company cannot afford to sacrifice the value that each group contributes. Crafting a straightforward, consistent message – and communicating it early – will help reduce anxiety in such a situation.
Say a big ‘No’ to Cultural Crashes
The blending of two distinct business cultures is frequently regarded as one of the “softer” aspects to remember during PMI planning and execution; however, research has shown that reducing conflict and avoiding cultural clashes is critical to the long-term success of a project. Each business has its collection of values, personality, and organizational hierarchy, and these aspects must be retained – from both sides – to ensure long-term productivity and efficiency. Even minor variations in each company’s values and attitudes can result in a cultural conflict, putting the unification effort at stake.
To sum it all up, Post Merger Integration requires a daunting degree of effort and coordination. To get it right means incorporating several organizational systems, such as assets, people, resources, tasks, and supporting information technology.
To make PMI a breeze, MergerWare brings the best in class platform that empowers the teams to efficiently and successfully manage this phase of M&A by:
- Aligning goals at all levels and efficiently using your resources, and defining responsibilities to individual team members and leaders.
- Clearly defining deal plans using either inbuilt playbooks or custom playbooks.
- Tracking progress from task level to deal level in real-time
- Tracking contracts and TSA’s easily
Want to ensure a higher chance of success with your acquisition by building a seamless PMI right from the start?
Connect with us, build a solid PMI team and get appropriate guidance in building and executing your plan from day one.