Mergers and acquisitions are vital to the growth of many businesses, yet roughly half of all M&As fail to create shareholder value. Why do so many deals—especially those that promise to offer substantial cost and revenue synergies—produce such disappointing results?
One major reason is that companies tend to treat post-merger integration (PMI) as a mechanical process that occurs after the deal is closed. In fact, it is the strategic and tactical choices made before the deal is legally completed—and often before the bid has even been made—that ultimately determine whether the integration will succeed or fail.
Also, PMIs are often treated as a one-size-fits-all process. Yet each PMI will have its own speed, style, focus, and rhythm. The PMI process must be tailored to account for those differences. As an example, a merger driven by cost synergies will require a very different strategy than one in which achieving revenue synergies is the main goal.
Despite the uniqueness of every PMI, there are 12 common rules that ensure organizations gain the value they expect from their M&A. These rules can be categorized into the three phases of every PMI.
The 12 Imperatives of Post-Merger Integration
SET THE DIRECTION
- Design the PMI to reflect the objectives, philosophy, and principles of the merger.
- Manage the PMI as a discrete process, separate from the day-to-day running of the business.
- Organize PMI teams to mirror the value drivers of the merger—and staff them with the best people.
- Insist on senior leadership that is active, committed, and highly visible.
CAPTURE THE VALUE
- Maximize cost synergies, but also plan for revenue synergies.
- Define explicit cost and revenue targets, and revisit them continually throughout the PMI.
- Retain current customers by making them an integral part of the PMI process.
BUILD THE ORGANIZATION
- Manage the talent—by selecting, retaining, and developing the best people for the new organization.
- Design a workable organization structure for the combined company.
- Recognize that PMI is an exercise in change management.
- Assume that it is better to have “too much” communication than too little.
- Manage the integration of organization culture with the same discipline and rigor as the operational and financial integration.