Post-Merger Integration - It is Never Too in the Deal Process to Start Planning
Submitted by Intralinks, a Partner of M&A Leadership Council
1. Preparation
It’s never too early in the deal process to start planning for post-merger integration (PMI). A common timing tipping point for initiating this process is when the letter of intent is signed. At this juncture, there’s a level of commitment on both sides of the deal table. Starting to craft a PMI plan at this stage allows enough time to ensure that financial and strategic objectives align with the tactical implementation playbooks. One of the first steps to ensure a seamless transfer from due diligence to PMI is to create a new content library where key documents can be housed. Companies that fail to have a concrete and detailed plan in place for day-one readiness put themselves at a severe disadvantage in terms of achieving expected synergies.
2. People
Identifying the right set of employees to spearhead PMI is an essential ingredient to PMI success. Formally designating an integration team lead is the first step. Ideally this individual has proficiency in leading these types of initiatives, as experience matters. The integration management officer (IMO) should then start assembling a small subset of trusted cross-functional leaders who will serve as the core team driving the project. This group will set the direction for the enterprise-wide PMI effort, track milestone progress and ensure accountability. It’s equally important that all members of the team are working from the same source of information; creating a centralized repository allows for this content exchange.
3. Prioritization
Launching the PMI process can be overwhelming at first. It’s common to have a lengthy spreadsheet containing hundreds of interdependent action items, projected cost and revenue synergies, and a series of time-based milestones. Conquering everything on day one isn’t feasible, but striking a balance between ‘quick wins’ and longer-term goals can make the process more digestible. There are numerous examples of companies undertaking seismic change too early in the PMI process, and the results are typically poor. A more pragmatic and ‘bite-sized’ approach reduces cost, time and headaches.
4. Communication
When a deal is announced there’s a natural sense of uncertainty around how the two combined entities will operate. Clearly, employees from both sides will harbor trepidation – but key business partners also will share that ambiguity. Customers will have many unanswered questions, as will vendors and suppliers. Uncertainty within these constituent groups generally leads to attrition, and the newly combined entity can’t afford to lose the value that each group contributes. Crafting a clear, consistent message – and delivering that message early – helps alleviate that anxiety.
5. Culture
The combination of two distinct corporate cultures is often viewed as one of the ‘softer’ elements to consider during PMI planning and execution; but research has shown that mitigating friction is key to long-term success. Each company has a unique value set, personality and organizational hierarchy, and certain aspects need to be retained – from both sides – in order to ensure long-term productivity. Even modest differences in each company’s beliefs and behaviors can lead to a culture clash that undermines the unification effort. It’s worthwhile to invest in a mapping exercise early in the process to better understand cultural differences, then share the data with a group of key stakeholders, and finally engage with constituents from both sides to bridge the gaps
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