Successfully getting a merger or acquisition across the line marks the end of a long, complex process. But, like all endings, finalizing a deal also sparks a new beginning: the post-merger integration process. Post-merger integration (PMI) is a critical phase immediately following a completed deal. It’s usually where that deal either lives up to the synergies that were promised or falls short of the expectations.
This article will explore several key strategies that your firm can leverage to successfully navigate the post-merger integration process. However, keep in mind that these are just general tips. If you’re looking for personalized guidance, then be sure to contact Acquinox Advisors today.
What is Post-Merger Integration?
Post-merger integration, also known as post-acquisition integration, is the process of ensuring that two or more merged companies work together successfully so that the new entity lives up to the expectations of the M&A deal. It’s a complicated process that involves blending the two companies together in one of four different ways:
- Preservation: When the target company continues to operate independently from its acquirer, retaining its own operations, brand, and leadership.
- Holding: When the target company retains some autonomy over its operations, but begins to align its culture, processes, or strategic vision with the acquirer’s over time.
- Symbiosis: When the target company absorbs almost all aspects of its new owner, but retains its strongest core competencies.
- Absorption: The target company is fully integrated into its new owner, and the old company effectively disappears.
The best post-merger integration process will depend on the respective operations and culture of each company. In most cases, executives will aim to create a new entity that evokes the best parts of both the target and acquiring company, whatever they may be.
5 Strategies for Successful Post-Merger Integration
Strategy #1: Start Planning Early & Emphasize Momentum
Following a surgery, doctors typically recommend starting physical therapy (PT) as soon as possible. Starting PT quickly can prevent muscle or joint stiffness, while also jumpstarting the body’s healing process. Post-merger integration works in a similar way.
Starting the PMI planning process early can help reduce any potential bumps in the road and shorten the time it takes to realize value from the deal. It’s generally best to start the PMI process as soon as due diligence is finalized, so that leadership can launch the strategy as soon as the deal closes.
The goal is usually to fuse both companies while maintaining business growth and minimizing the impact on day-to-day operations. Planning early and emphasizing momentum are key to achieving this goal.
Strategy #2: Set the Direction & Commit
Setting the direction involves defining the basic objectives of the integration. These objectives were likely well-defined during the deal process, but it’s important to reevaluate them in case any terms of the deal changed during the finalization phase. A few key steps while setting the direction include:
- Identifying key stakeholders
- Creating an integration team (or teams)
- Setting clear objectives
- Creating an integration roadmap
A critical part of this strategy is appointing leaders to the integration teams and securing their commitment. This brings us to strategy #3.
Strategy #3: Encourage Key Stakeholders to Participate
It’s critical that stakeholders from both the target and acquiring companies are actively participating in the post-merger integration process. These are the people who will ultimately set the tone for the new entity and have the biggest impact on employee morale and engagement.
Strong leadership during this turbulent time can lead to enhanced employee engagement, which will ultimately help maximize the synergy of the merger. A lack of leadership during this critical phase can have the opposite effect.
Strategy #4: Streamline Decision Making
There will likely be many questions and unknowns that occur during the PMI process, regardless of how much planning is done. This is why it’s critical to create the infrastructure for fast, streamlined decision-making.
Having a system in place for rapid decision making can help optimize business momentum and employee morale. One common strategy is to create small teams with well-defined leaders who are held accountable for the outcome of their decisions.
Strategy #5: Prioritize Top Talent
As the saying goes, employees are a company’s most valuable asset. Talented employees fill crucial knowledge and skills gaps, drive innovation, and serve as the face of the business. This is why it’s incredibly important to prioritize and retain top talent from both the target and acquiring company.
Recruiting and training new hires is an incredibly costly endeavor, so it’s advised to make use of the talented employees who are already involved with both companies. Key steps to take include identifying top performers from both organizations, putting them in leadership positions, and filling necessary positions quickly so that operations don’t suffer.
Final Thoughts: Successfully Navigating Post-Merger Integration
Post-merger integration isn’t just a box to check after the deal is signed. It’s the make-or-break phase that determines whether your investment actually delivers the value that was promised during the deal. We outlined a total of five strategies in this article:
- Start planning early and emphasize momentum
- Set the direction and commit
- Encourage key stakeholders to participate
- Streamline decision making
- Prioritize top talent
While these strategies can help form the backbone of a successful integration, remember that every merger is different. Some companies may benefit from a full absorption strategy, while others are best served by allowing autonomy and brand independence to continue. There’s no one-size-fits-all playbook.
Additionally, what truly drives success is understanding that PMI is as much about people as it is about processes. Even the most well-executed strategy will fall short if key personnel feel confused, alienated, or left behind. This is why it’s critical to ensure that you have the right people on your team to help navigate this process.
If you’re about to embark on a post-merger integration journey – or find yourself knee-deep in one – it’s never too late to ensure that you have expert guidance on your side. Contact Acquinox Advisors today to get support that turns strategy into results.
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