What Every Acquirer Should Know about Post-Merger (M&A) Integration

 

Why should acquirers follow a well-defined process for an M&A integration?

Yes.  When integration teams follow the same steps in the same sequence, use common tools, operate under a common framework, they accomplish more sooner and with less effort.

 

What are the steps in the M&A integration process?

  1. Define Integration Strategy and Guiding Principles
    Facilitate executive session with senior leaders to determine planning direction and clarify integration goals, assumptions, non-negotiables, success metrics, and vision.
  2. Determine M&A Integration Governance
    Define the hierarchy, structure, roles, and resources for the integration project .
  3. Conduct Joint Integration Management Office (IMO) Meeting
    Plan and facilitate an IMO kickoff event to formally commence the integration process and officially onboard integration teams by reviewing pre-planning input, rules of engagement, objectives, and methodology.
  4. Provide Post Merger Integration Training
    Teach integration teams a common methodology for the integration. Level set everyone with the same information.
  5. Develop Post Merger Integration Risk Management Plan
    Create risk management plan that proactively addresses major events that could negatively impact the integration.
  6. Develop Culture Integration Plans
    Perform culture analysis that isolates the cultural risk factors that pose the greatest integration challenges and develop plans to address them.
  7. Develop Post Merger Integration Communication Plans
    Create detailed communication plans including detailed Day 1, week 1 schedule, and event sequence.
  8. Develop Post Merger Staffing & Retention Plans
    Develop approach, process, and timing for “Newco” cost and organization structure recommendations.
  9. Develop M&A Project Integration Plans
    Create a comprehensive project plan and timeline for all integration activities including a detailed integration road map that includes integrated schedule, budget, and milestones for each functional work stream.
  10. Execute Acquisition Integration Plans (Includes Day 1 Plans)
    Implement plans and closely monitor the success of implementation with respect to quality, time, costs, and synergies.
  11. Capture M&A Integration Lessons Learned
    Debrief to document and capture key learnings about the integration process.
 

What is the single best predictor of M&A integration success?

The length of the integration. Disappointing deals are highly correlated with slow consolidation. Acquirers should combat the natural tendency to study the situation and try to craft a perfect integration plan. There are no perfect solutions in the game of mergers. Only good and timely ones. The conservative, slow, methodical approach typically doesn’t cut it in a merger integration. That can be the most reckless strategy of all.

From Burn up the Road.

 

What is the most consequential meeting in an M&A integration?

It is IMO kickoff meeting attended by the steering committee, IMO core team members, and functional team leaders. This meeting is crucial because it lays the groundwork for everything that follows. The subjects covered should include integration strategy, objectives, governance, non-negotiables, priorities, and timelines. The session is very empowering to functional team leaders because they are given the direction they need to begin to develop their detailed plans.

From Step 3: Conduct Joint Integration Management Office (IMO) Meeting.

 

What is usually the worst managed aspect of integrations?

Communications. It is commonplace for an acquirer to assume that it has done a satisfactory job of communicating to people who’s in charge, who reports to whom, and what’s expected of everyone. But people constantly complain about confusing lines of authority and an ill-defined power structure. Employees feel they are operating in too much of a fog. The situation breeds frustration and tangled relationships, with the result being a blow to employee motivation.

 

What is the usual length of an M&A integration?

Given every deal is different, there is no typical length. However, if adequate time has been spent planning before close, if the integration is properly resourced, and if the company has its handle on IT integration so it does not slow momentum, then the apex of integration efforts is usually not later than 120 days after close. At that point, the level of integration activity begins to declines. Keep in mind, the 120 days is an average and there is wide variability around it. And different functional teams (IT, HR, Finance etc.) will probably finish their integration work at different times.

 

Why are early wins critical to M&A success?

Management should identify some easy ways to capture successes. Early wins build confidence in the deal. They give people a sense of accomplishment and build momentum. Critics will point to any lack of progress as evidence the deal is a bad one. Wins help offset their skepticism.

 

Why should staffing decisions be made early? 

Sometimes, top management in the acquiring firm decides it is best to allow some time for them to get to know the abilities and potentials of the management team in the target organization. But that assumes that those people will hang around long enough for such a familiarization process to occur. Often, they do not. Furthermore, while taking the slow route, a part of this getting-acquainted exercise may consist of seeing bad management decisions being made, mistakes that could have been prevented. Likewise, key opportunities may be lost. All in all, this can prove to be an expensive and time-consuming education process. This approach also drags out the integration of the two firms. It forestalls needed resolution and leaves questions unanswered, prolonging the anxiety and ambiguity, thus contributing to the chronic problem of post-merger drift.

The situation feels like benign neglect to people in the acquisition, as if they are being left to dangle helplessly in the wind. In their opinion, it would be better to get closure, to be appraised promptly and fairly, so that they can get on with their careers either secure in the merged firm or somewhere else.

 

What are the most common complaints from employees during an integration?

Employee complaints sound like this: "Nothing's happening . . .Why don't they get on with it? . . .They're moving too slowly." Instinctively, the employees seem to know what’s best. Certainly, they know what they want, and that is for top management to get the merger over and done with instead of letting it drag on and on. Fast people can live with, but across the board, people hate slow.

From The Most Common Complaint During M&A Integration.

 

What is an M&A integration playbook?

A playbook is a how-to step-by-step operating manual for an M&A integration. It clarifies what needs to be done, by whom, and by when. Plus, it defines the integration team processes for governance, reporting, communications, and risk and issue management. Effective playbooks bring consistency, predictability, and reliability to the integration process and shorten the learning curve for team members.

From M&A Integration Playbooks.