After the closing of an M&A transaction, many buyers and sellers feel relieved. They know the work of strategy, valuation, financing, structuring, due diligence, and negotiation is behind them. But for strategic acquirers, the conclusion of an M&A transaction is also the beginning of a new process—combining two companies, usually in their entirety.
An acquired firm may complete an important strategic aspect of the acquirer. For example, when Wisconsin-based All State Ag Parts acquired Steel Traks, Inc., it stated that the acquisition “continues our expansion into serving the construction equipment industry with a full line of parts.” Such deals—typically structured as acquisitions--have recently been referred to as “tuck in” transactions. In a transformative deal, often structured as a merger, each company strengthens (and to some degree changes) the other—delivering the “synergy” that can either be a trap for wishful thinkers or a true strategy.
As an example of the latter, consider the 2023 merger announcement for Kubient, an American digital advertising technology company with AI capability, and Adomni, an online marketplace for digital advertising. The press release stated that Adomni would “expand its product offering with enhanced features around artificial intelligence (“AI”) technology” from Kubient, and that conversely Kubient’s AI product KAI would “deliver better advertising campaigns via Adomni’s platforms.”
To achieve the kinds of benefits promised in such deal announcements, most acquisitions entail a full-scale integration of all resources, processes, and responsibilities for both companies—often with hundreds of moving parts. To deal with these details, comprehensive, detailed integration plans are needed.
At the same time, the company and its stakeholders need to prepare for the possibility that some company units or assets may be sold or discontinued following an acquisition. This possibility, too, should be part of postmerger planning.
This section briefly explains basic concepts of postmerger integration and divestiture, and gives general guidance for the fiduciary care of key resources, processes, and responsibilities following the closing of an M&A transaction. Our explanation will be at a fairly high board-of-directors level.