Best practices in post-merger integration
Proper integration planning can help a transaction deliver full value
Integration planning is rarely contemplated at the outset of an M&A Transaction. But companies embarking on a merger or acquisition should recognize that poor integration planning can lead to harsh results, from weak decision-making to a lost focus on everyday operations. Executives eager to avoid the repercussions of a poorly implemented integration can learn from the experience of two Deloitte practitioners, Charles Knight and Ryan Brain, who share their best practices on executing an effective post-merger integration.
As national leader of Deloitte's M&A Transaction Services practice, Charles Knight has helped many companies chart their course to an effective post-merger integration. "The earlier a company identifies the critical issues surrounding the integration, the higher probability it has of structuring a deal that fulfills its potential," says Knight. Ryan Brain, a partner with the Financial Advisory practice, observes that "it's one thing for executives to buy a company, but it's quite another to ensure that they derive the expected value from the acquisition." With this in mind, Knight and Brain offer four best practices for a profitable integration:
- Articulate the vision and business benefit of the merger or acquisition. It is essential for management to clearly define the vision for the integrated organization. Companies must identify each expected source of benefit, including accurate integration forecasts across a specified period of time. The expected synergies resulting from a merger or acquisition must be clearly identified and communicated if the company expects subsequent financial benefits once the deal is complete. It also helps to select strong sponsors and managers capable of achieving specific milestones set out in detailed integration work plans.
- Develop an effective integration plan. A smooth integration depends on identifying, prioritizing and measuring synergies long before the deal goes through. Companies that succeed in maximizing long-term value frequently plan for integration and synergy capture at the due diligence stage. This head-start allows them to plan for not only short-term issues, such as keeping the business running, but for long-term issues as well, such as how to transform the newly created entity.
- Assign a dedicated integration team. To ensure that the integration program does not divert attention from managing day-to-day operations, executives should allocate specific resources to managing the integration. By appointing a project manager and securing strong executive support, businesses are much better placed to quickly tackle risks and ensure a smooth transition following the merger. It may even be useful to provide key team members with incentives throughout the integration or until results are realized.
- Overemphasize people. Companies should not overlook the effect that a merger can have on employees. Businesses that fail to quickly implement a new organizational structure risk increasing uncertainty, ambiguity and fear among staff members. It is essential to prepare the human resources team to recognize and resolve potential cultural differences as early as possible. In addition to communicating the impact of the merger at every level of the organization, executives must be prepared to stay in front of management issues and provide quick answers to questions regarding people's ongoing roles and responsibilities.
For most companies, mergers and acquisitions tend to be isolated events. Few organizations, therefore, possess the experience to guide their businesses through all elements of a merger. But by starting early and structuring an effective integration plan, merging organizations can position themselves to maximize shareholder value and realize the anticipated synergies.