Mergers and acquisitions, to put it nicely, involve a lot of moving parts. 

 

But what happens after the deal has (apparently) been completed? What is post-merger integration, exactly? 

TEIG has worked with many organizations before to protect clients from the distraction after an acquisiton, so in this article, we'll discuss the importance of post-integration in M&A, the process, best practises, post-merger integration software, and the true definition of post-merger integration. 

But first, let's look at the definition of M&A post-integration. 

What is Post-Merger Integration in M&A? 

M&A integration, also known as post-merger integration (PMI), is the process of merging two or more companies with the goal of optimising the synergies that were identified and ensuring that the deal's expected value is realised. Post-acquisition integration is another term for the same process. 

Problems during M&A, in particular, frequently result in the failure of deals or, at the absolute least, the inability to extract actual value from them - no one wants a deal that looks good only on paper or results in a semi-integrated firm. 

With this in mind, post-merger integration planning should begin at the outset of the transaction, with best practises, key team members, and m&a integration plans in place before the deal closes. 

Who is in charge of mergers and acquisitions integration and other post-merger activities? 

Placing value around the merger from the top down is one of the most important post-merger success criteria. 

A company's management should convene all potential stakeholders involved in the due diligence process for a deal at the start of the M&A process – bankers, legal professionals, consultants, and so on. 

They should start communicating about the details of the post-merger integration right away. 

Better yet, every communication throughout the due diligence phase of M&A integration should keep the post-deal integration period in mind. 

 

Best practises for post-merger integration show that DD personnel should become members of the team in order to keep and revise information without redoing work or performing redundant tasks. 

There's value in the consistency of using the same people for due diligence as you do for your integration, which is crucial throughout the frequently tumultuous period of deal closure and post-acquisition integration. Having overlap between the due diligence and integration teams is the best and most efficient approach of integrating. 

This technique also increases the possibility that the team will sustain momentum and capture deal synergies, or "low hanging fruit," discovered during the first 120 days, making it an important M&A integration strategy. 

Although more and more M&A professionals recognise the necessity of integration planning, operations (even at major acquirers) still frequently miss the mark because the all-too-important "people" aspect can get buried in the shuffle of modern business life. 

During the critical early days of integration, when competitors tend to go for both personnel and clients of the target company, this blunder might result in the loss of employees and clients. 

With this in mind, practitioners must be prepared to implement and communicate critical information regarding targets, employee positions and benefits, and the company's future on day one - people, of course, plays a critical part in the "human" aspect of integration. 

However, HR cannot do everything; your acquisition transition plan will fail if it does not account for change management. Making change management its own role is the first rule of change management best practises. 

The acquirer gains valuable information about the target company (which can help maximise potential deal value), the target company feels cared for and employee morale/buy-in improves, and secrets are revealed (i.e. information comes to light that current leadership may be completely unaware of) - all of which will help avoid major and costly problems. 

One last point to consider when putting together an M&A integration team and acquisition merger plan: when choosing a leader, members of the due diligence team should make a checklist- remember, excellent practises and the value placed on post-acquisition integration comes from the top-down. 

A post-merger integration checklist is a step-by-step agenda that keeps teams on track in the lead-up to a merger or acquisition. Because it will involve all departments and individuals, the PMI checklist can also be thought of as the backbone for the overall company merging strategy, as it extends far beyond the traditional post-merger integration plan. 

The checklist should include preparations for hiring processes for both short and long-term demands, redundancies, turnover, staff retention, M&A IT integration, technology, system merging, and employee performance-tracking, among other things. 

Those in key positions should also complete a post-merger integration questionnaire to help understand and align priorities. 

The following items are included in the post-merger integration plan: 

Short-term requirements 

Long-term requirements 

Process\sBenefits/compensation

Make sure you have the best personnel. 

Forms for layoffs and severance pay

Combine systems

Plans for Employee Performance Training 

Documents and procedures are reviewed by employees. 

Human Resource Management Systems 

 

 

Data and Knowledge - A plan for integrating knowledge such as customer, product, and service data is included in this section. 

Technology and Systems - Companies that are integrating must have a strategy for combining their technology and systems. Which CRM will both companies use in the future, for example, if they currently use different CRMS? 

Internal Policies - How will the two merging companies handle internal policies like new employee training, salary changes, and employee exits, among other things? 

Business Procedures - The strategy underlying future business operations, such as seeking new business and future mergers, is included in this category. 

Company Culture - The backbone of any company is its culture. There will undoubtedly be conflicts if one company operates from 8 a.m. to 5 p.m. Monday through Friday, while the other offers flexible hours and work from home days. Before the merger and acquisition integration is complete, the two companies must agree on the company culture that will emerge following the close. 

Organizational Structures - Organizing department structures is included in this category. Will the two human resources departments, for example, merge or will each have its own set of responsibilities? 

Products/Services - Prior to the merger, each company had its own set of products and/or services. They must decide whether to keep, combine, or eliminate the products and/or services offered, as well as the accompanying branding. 

Post-acquisition integration can be divided into four categories. 

Absorption - When an acquiring firm entirely absorbs a target, including all processes, organisations, and procedures, it is known as absorption. 

Symbiosis - occurs only in specific areas to aid in the merger or acquisition's goals. 

Preservation - The target company is mostly retained self-governing, but there may be some financial data integration. 

Holding - When the acquiring business owns the target company but does not integrate it with its own operations. 

The planning, or lack thereof, that occurs at the outset of the deal's lifecycle has a significant impact on the post-merger integration process (or m&a integration process). Here's a rundown of the steps to help you with your M&A integration strategy:

M&A integration planning must begin at the start of the transaction, and goals must be re-evaluated on a frequent basis throughout the integration process. Teams are also formed around cross-functional goals that are aligned. This gives everyone a bird's-eye view of the big picture and eliminates cross-functional dependency difficulties.

At the start of the contract, a kick-off meeting should be organised. A list of people who will be involved in this phase must be created at this meeting. It's vital to define governance and the functioning post-merger integration structure for how teams will collaborate, such as scheduling meetings, managing dependencies, and sharing information, at this point. 

While due diligence hasn't traditionally been considered part of PMI, successful mergers and acquisitions maintain a close eye on the process. 

Pre-close (not technically part of PMI, but critical to a successful outcome) - synergies should be assessed and confirmed, and teams and team leaders should be formed. 

Hold a kick-off meeting after the merger. 

Establish communication channels and hold weekly or monthly stand-ups to report progress. 

Throughout frequent small iterations, teams examine and evaluate the post-acquisition integration. As fresh knowledge becomes available, it becomes easier to realign a team and their goals. 

A complete plan must be in place before the deal closes in order to have a successful merger and prevent frequent dangers. 

Teams must develop a game plan for employees, as well as an M&A integration checklist, set targets, track progress, and maintain open lines of communication. 

This standard approach to integration is accompanied by a 100-day M&A integration strategy. Teams can follow an integration strategy with this mindset, and the integration should be at a specific point after 100 days. 

Many teams, on the other hand, are abandoning the traditional integration methodology in favour of other methods. 

There is no established time limit for how long post-merger integration should take. 

Because each deal is unique, each post-deal merger has its own cadence. It could take months, if not years, to finish. 

Regardless of the type of transaction, planning should begin as soon as possible, alongside due diligence, and before the transaction closes. 

Although there are numerous sorts of strategies, here are some typical post-merger integration stages and best practises to follow. 

1. Reduce workload friction by having open and honest discussions and establishing a comprehensive budget. 

While not all organisations can afford to have its own merger team, there are several things that smaller businesses can do to ensure that key personnel have a balanced and manageable workload. 

Honest interactions between workers and Corp-Dev are required in order for post-acquisition duties to receive the attention they require. 

What can be achieved in reality? Is it possible to delegate day-to-day activities or projects to other staff while specific individuals work on the merger? Companies may consider hiring temporary labour and factoring this into their budget in some instances. 

The budget should be scrutinised carefully and realistically. 

2. Utilize M&A tools that can also be used for post-merger integration. 

While no solution can solve all of a team's M&A concerns, the correct tool and M&A software can help teams speed up the integration process and create useful data. 

When the right tool is utilised for post-closing operations, its data can be reused, and the tool can assist in minimising repeated work, which is a common stumbling block that slows down the entire process and wastes valuable employees' time. Items can be marked throughout the due diligence phase for m&a integration, for example. 

3. Arrange for one-on-one interviews with the staff in the target firm. 

Successful M&A merger practises don't miss the fact that, as previously mentioned, change management is an important aspect of the M&A integration plan. 

4. Conduct a climate survey utilising a post-merger integration questionnaire after around 6 months and deliver the results to executives. 

Many stakeholders are duped into underestimating the importance of effective change management and integration strategies. 

Indeed, when working on smaller deals, the buy-side can sometimes get away with using sloppy procedures and ignoring the critical legwork associated with proper change management. 

However, when purchases grow larger, failing to address change management will almost surely result in post-acquisition issues. 

The bottom line is that huge deals necessitate strong change management practises. Employees should be given a climate survey at the six-month mark, according to experts. Again, the information gathered should be examined, and the results should be presented to senior management in the form of a report. 

This will enable the company's leadership to assess what is working well and what needs to be addressed or improved in order for the integration process to continue in the right direction. 

5. Finally, avoid the infamous M&A Post Merger Integration "playbooks"  

While there has been an increasing need for deal "playbooks" in recent years, the term has taken on a more negative connotation in the industry due to the reality that no two transactions are identical. 

Because all negotiations contain distinct people, emotions, products, and risks, it is impossible to have a PMI template for every component of a deal. Even though your target firm might appear to be quite similar to a previous target company, you must keep in mind that the current agreement may be different since you, the acquiring company, have evolved. 

One could even argue that the desire to follow an M&A integration playbook is harmful to the deal because it can lead to tunnel vision, causing problems with big picture alignment and customer relations, and failing to recognise the uniqueness of each deal, all of which jeopardise the deal's value maximisation. Instead of relying on playbooks, strive to adopt a more Agile, or flexible, attitude and investigate frameworks and other PMI tools. 

While playbooks aren't ideal for the ever-changing and unpredictable world of M&A, basic game plans and frameworks are essential. 

That’s why TEIG offers has made their framework of 4 key strategies for a successful integration available to the public, so that – like us – you leave no synergies on the table. 

To learn from a consultancy whose integration success means clients can look forward to what comes after a merger or acquisition, click here. 

Because we only win together