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Master the integration process and achieve your merger goals!
Executive Education / 23 February 2024
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(Former) examiner in the M&A online programmes at Frankfurt School
Jens Ekopf is a partner at Dr. Wieselhuber & Partner GmbH and heads the Business Performance Improvement department. His main areas of expertise are strategy & business transformation, company-wide reorganisation and efficiency programmes, poster merger integration and carve-outs, as well as strategic controlling and management systems. His corporate focus is also on family-run companies and large, listed groups. Before joining Dr. Wieselhuber & Partner in 2023, he worked in leading positions at well-known consulting firms, including many years at KPMG and Horváth & Partners.

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Mergers are always accompanied by high expectations but often also by fears. Numerous studies have confirmed that more than half of all mergers fail. The value of the combined organisation is usually significantly lower than the value of the individual companies. Goals such as realising synergies, developing new customer segments and sales markets, accessing know-how and technologies, and securing important raw materials and supply chains are often not achieved at all or only partially.

No two mergers are alike

Mergers usually fail not because of a hasty selection of candidates or a lack of preparation but because of unrealistic goals and poor post-merger project management. In international mergers, different corporate cultures and cultural differences add to the complexity. Each merger is unique, and the acquisition scenario is different. A methodical and consistent approach is therefore crucial. For a merger to have a chance of success, it is important to understand the starting position, the environment and the motivation of the two original companies for the subsequent integration and to take this into account in the integration approach. The fundamental drivers of the integration should be analysed in depth to integrate the different facets into a holistic PMI approach:

Figure 1.: Elements of the integration

Just as the decision to make an acquisition should be based on a sound valuation as part of the due diligence process, it is necessary to define and consistently pursue a clear integration strategy for the post-merger phase. The post-merger integration (PMI) approach aims to strike a balance between time-critical initial actions immediately after the contract is signed and the long-term positioning of the new combined organisation for growth-oriented business transformation and value creation. In particular, the following action areas should be prioritised:

  • Consistent, holistic identification of synergy and growth potential
  • Development of the integration strategy of a PMI scorecard for periodic monitoring of the integration success – the scorecard must operationalise the integration goals
  • Ongoing programme and risk management
  • Stakeholder-specific change and communication management in all phases of the PMI
  • Technical and methodological support for functional teams during the integration implementation
  • Active interdependency management created by the functional integration teams along with the value creation and management/support processes

Approach for a successful post-merger integration

In the planning phase (1), concrete integration goals are defined by the M&A team, including a business rationale, a transparent evaluation system, and a plan for the first 100 days of parallel business operations. The design and integration phase (2) focuses on implementing this plan and integrating processes, structures and technologies. The third phase (3) concentrates on sustainable reorganisation and optimisation for long-term process and system adjustments. Ideally, projects should last no longer than 12-18 months to quickly transfer the business units to their operational responsibility in line with the principle of “Speed with Purpose”.

Figure 2.: The elementary phases of post-merger integration

A central programme management system should be established for all phases. Even before Day 1, there must be clarity about the organisation’s responsibilities. The focus should be on the stability of the day-to-day business and transparent communication with customers, suppliers and, most importantly, the organisation’s own team.

Conclusion

If you want to master your integration processes and achieve your merger goals, you need a concrete roadmap that takes the following points into account:

  1. Develop a clear vision at an early stage
    Before the merger, a clear vision must be defined to set the direction and hold the new company together.
  2. Define clear leadership responsibilities
    Companies should avoid temporary chaos at the management level, which can lead to a “survival of the fittest” power struggle. Unclear lines of responsibility and unresolved conflicts can lead to demotivation of all parties, thereby stalling the integration process.
  3. Focus on growth synergies
    Growth must be the central theme of the merger, not cost synergies. New markets, new customers (or customer groups), new distribution channels, etc., usually have a high sustainable value for the merged company. Cost synergies are achieved on a one-off basis, but they must also reduce unit costs in the long term.
  4. Convince stakeholders with “quick wins”
    Nothing convinces those involved in a merger more than minor but significant successes. These “quick wins” signal to stakeholders that the merger is on the right track. Examples include efficiency potential in the processes, the use of joint technologies or a significant reduction in unit costs in joint production.
  5. Recognise cultural backgrounds and overcome differences
    How merging companies approach the integration of their corporate cultures is as varied as the cultures themselves: Some lapse into lethargy and simply do nothing, others try to impose their own culture on the merger partner, and still others try to create an entirely new culture. Active Change Management with a high level of transparency can help here.
  6. Communicate in a target group-orientated manner
    Circular letters to employees and mailings to customers are ineffective when it comes to gaining approval, providing orientation and managing employee expectations. Addressing target groups and answering questions individually is the key to success here.
  7. Tackle risks provocatively
    Unfortunately, most companies still spend too little time on Risk Management. To avoid losses, integration risks must be systematically identified before they can be minimised or addressed.

In conclusion, the path to successful integration is a continuous learning journey that requires expertise and strategic insight. To further develop your skills in this key area, we recommend the following specialised training programmes: Certified M&A Associate (JV&A) and Certified M&A Integration Associate.

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