Research has shown that roughly half of all M&A deals fail to create shareholder value, which is the main purpose of the deal. Why do so many deals prove so disappointing?
Post-merger integration (PMI) is a crucial part of the merger (or the acquisition for that matter), which numerous companies unfortunately fail to conduct in a successful manner. The success or failure of most mergers and acquisition deals is a result of what you do after the deal is closed and how well you do it – and not so much what you buy/merge with. However, merging one company with another can be a very complex process, taking place under severe time pressure and simultaneous with running the core business, which as a result can cause a number of problems. One of the main challenges in post-merger integrations is to overcome the tendency that companies have to treat PMI as a mechanical process that occurs after the closing of the deal. Time and time again it has been proven that it is in fact the tactical and strategic choices that are made before the deal is closed that determines the success or failure of the integration. Also, it is essential to realise that different deals call for different PMI processes. For instance, a merger driven by revenue synergies requires a different strategy than one that focuses on cost synergies.
Even though each PMI is unique there are still some common tips for a successful integration:
- The PMI should be designed to reflect the objectives and principles of the company
- Hold on to the strategic and financial objectives of the deal
- Come up with appropriate incentives for the target company’s management
- Include key persons early in the process
- Attempt to maximise cost synergies but also strive for revenue synergies
- Make sure to define explicit cost and revenue targets and revisit them throughout the PMI process
- Retain the existing customers by including them in the PMI process
- Ensure a talented and competent staff by selecting, retaining and developing the best people
- Communication is key; too much is better than too little
- Focus on the cultural integration just as you do with the operational and financial integration
- Remain focus on the daily operations during the deal process
- Involve professional and experienced advisors from the beginning
In order to ensure the best post-merger integration where all these important considerations are taking into account you can benefit from assistance from euroMerger and our knowledge and experience.