The key to acquisition success is the thorny matter of harmonising operations, cultures and strategies between target and acquirer. Here we outline the key challenges and how to navigate through the post-merger integration phase.

Understanding Post-Merger Integration

Value creation in M&A depends on careful alignment of finance, HR, operations, technology and marketing functions in the target, the acquirer, or in a newly formed business unit.

The process of achieving synergies, operational efficiencies, customer satisfaction, and employee morale can be summarised into the four Cs: customers, capabilities, culture and communication.

Experienced acquirers may have an onboarding team to handle target integration, while ad hoc acquisitions are commonly left to the divisional director supported by an HR manager. However, other experts may be needed and the UK market is well-served with post-merger integration specialists.

The key themes to focus on are:

Cultural integration

Culture clash is rarely publicly acknowledged as a reason for M&A failure, yet remains one of the most significant challenges.

There are three key steps to managing culture during a merger.

Identify how works gets done

Is decision-making centralised or decentralised? How are people motivated – financially or emotionally? How is everyone held accountable – individually or as teams? Leaders’ instincts are insufficient here – use a methodical approach.

Agree quick wins and major effort

List areas/functions of cultural alignment and create new targets and objectives. Then note areas where values and behaviour are different within the same function and discuss with target and acquirer leaders how to resolve.

Make changes and provide support

The first two steps will identify themes and initiatives, which now require redesign of policies, processes, values and governance to make sure the changes stick.

Internal communication is vital here. Cascading info may not be the best way…it’s more effective to recruit influencers from the ranks as change agents. Practical examples here include changes to dress code, appraisals, bonus formulae etc.

Communication and stakeholder engagement

Most stakeholders are unlikely to want to celebrate your big merger news or latest acquisition. They want clarity and guidance from Day 1. Who is the new boss? Where is the new headquarters? Tight messaging is needed, embedded by frequent communication and repetition.

As the weeks and months go by, other milestones and delayed changes need careful handling. Tell customers of any alterations to product portfolios, ordering and billing systems, or changes of account manager.
Finally, don’t forget to celebrate unexpected wins as new teams collaborate and trust builds.

Leadership alignment

This is a minefield requiring careful handling. CEOs often get distracted by their ‘shiny new toy’ and often override sensitivities putting other leaders on edge, and noses out of joint.

A lack of clarity on roles, responsibilities and decisions minimises uncertainty or overlaps and bust-ups. An experienced HR manager is a must to observe behaviour changes which may signal unhappiness not just among those involved but the wide parent company.

On the flipside, we have known businesses sold and owners walk away, only for the acquirer to take months to find someone to manage the business unit. It goes without saying that these turn sour very quickly, with even the ex-owners embarrassed and angry that they sold their business to someone who doesn’t appear to care. Attempting to combine businesses without a leader figure never works.

Technology integration

Messy, delayed, expensive – most of us are familiar with banks who merge but take years for their branch systems to sync up.

IT synergy savings are prone to exaggeration, while data security issues need careful handling – especially in areas like patient records on healthcare tie-ups.

Unless its glaringly simple and both parties are using the same systems, consider hiring an IT contractor to identify roadblocks in system, data, and infrastructure integration.

The warm glow of success

Post-merger integration requires meticulous planning, effective communication, and collaboration from boardroom to shopfloor to achieve the desired synergies and results.

By addressing culture, capabilities, communication and customer concerns, organisations significantly increase the chances of realising values. Getting it right also provides a useful template for further acquisitions to scale-up seamlessly.

Further reading

• M&A Integration: how to do it – Danny A Davis 2012
• Achieving Post-Merger Success – Carleton and Lineberry 2004
• Creating value from M&A: The Challenges – Sudi Sudarsanam 2010