A sound M&A strategy, supported by due diligence, does not translate automatically into a successful merger or acquisition. How you approach the initiative can make the difference between success and failure.
Managing the integration of two companies is extremely challenging (recent research finds up to three-quarters of mergers and acquisitions fail). But it is not impossible. Whether you’re leading the integration of your function or of the combined organization, you can prevent disappointing results by applying a structured approach to avoid these three pitfalls:
As a matter of convenience, companies often assign internal personnel to run the integration. Even in cases where an Integration Management Office (IMO) has been established with additional resources, the functional departments often assign the integration work to members of their team. However, this approach may result in a team lacking the time or necessary skill sets to address the integration’s specific challenges. Select personnel may have day-to-day responsibilities that conflict with their new assignment. Or capable, experienced personnel may be passed over in favor of readily available, less experienced individuals.
Internal personnel biases may present another challenge when building a team from within. Internal team members’ points of view relate to their current organization or their respective functions, not necessarily to the needs of the new, combined organization. These conflicts can create tension and poor team dynamics.
Organizations and functions may feel pressured to integrate quickly to meet senior management expectations and realize synergies. In many cases companies prioritize speed at the expense of proper planning, which can lead to disorganized teams, dysfunction, and extended integration timelines. Often integration teams are asked to execute based solely on a few milestone dates that were created early in the initiative when the necessary data and knowledge did not exist.
Moving forward without a detailed integration plan carries great risk, including lack of organizational alignment and failure to work on the activities that matter most.
To create an efficient integrated organization, consider cultural differences early in the planning stages. Both organizational and department cultures should be addressed and built into integration activities. Establishing sustainable operations is key to realizing the growth objective of the integration, and, without a thoughtful plan for how to achieve a unified culture based on personnel buy-in and understanding, this establishment can be difficult or impossible. Plan for change early and often.
Lastly, ongoing operations are an often-forgotten aspect of integration planning. An integration is arduous, and trying to do too much, too fast can cause major disruption to the current state, particularly as it can distract key resources from day-to-day operations. Failing to manage and sustain operations during a period of dramatic change can result in missed product launches, delayed regulatory submissions, duplicative reviews/approvals, and out-of-control costs.
Integration success hinges on effective communication to internal and external stakeholders, all of whom have unique interests and needs. Lack of quality communication can breed significant risk within the integration. The causes are varied and may stem from trying to maintain confidentiality as the integration ensues, a lack of decision-making, or poor planning. Inadequate communication also may cause personnel confusion or negative attitudes, creating risks to maintaining ongoing operations. Employee turnover, customer attrition, and delays in completing the integration in a timely manner are just a few of these risks.
Mergers and acquisitions integrations can be challenging and risky endeavors. But you can execute them properly by taking a step back and developing a thoughtful approach. The formula may be simple, but success comes down to a matter of approach: building a strong team, developing and executing an integration plan that is aligned with the deal synergies, and planning and providing robust communications.
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