Success factors in merger integration

What are success factors?

Success factors influence the success of a merger integration project. Success factors can be described by:

  • influenced object (employees, revenue stream, timeline)
  • effect (retention of employees, more revenue,faster completion)
  • measures to support (increase salaries, hire salespeople, provide more budget)
  • tracking, e.g. by Key performance indicators (employee number retained, revenue, progress of project)

What are success factors in merger integration?

By looking at a large number of successful and non-successful merger integrations you can identify the following success factors for merger integrations. The success factors are classified to be:

  • within the acquiring company,
  • within the acquired company,
  • between the companies,
  • in the business case for the merger,
  • environmental factors.

Factors within the acquiring company

  • M&A capability maturity

how well can the acquiring company integrate a target? it goes in three dimensions: number of people in corporate functions, amount of M&A experience in the acquiring company, number of dedicated M&A resources. for more information click here.
  • Integration plans in place before close

semper preparatus. you cannot execute when you have no plan to execute, it is simple but true and holds for acquisition integration, too.
  • Blueprinting workshop in place before close

if possible, you should work with the target to check your integration plans and create a joint plan. the advantage is buy-in from the target and you save time to discuss and agree on plans post close.

Factors within the acquired company

  • Private company vs. public company

While integrating a public company carries some delays in planning and integrating, a private company does not have these restrictions.
  • Low need for restructuring during merger integration

Merger integration is a huge change management challenge. Why not add some more change like restructuring? maybe not a good idea.
  • Low need for EbIT improvement

Same as for restructuring.

Factors between acquiring and acquired company

  • Similarity of organizations

the more similar organizations are, the less change will be anticipated and employees tend to find a new home and comfort more quickly. but there is a caveat: more similarity might also mean more overlap and redundancy between organizations.
  • Similarity of business models

the more similar business models are, the better the operations of these business models can be integrated. For software companies, this means easier integration in development and support but also in administrative functions. Look for similiarities by listing/modeling the business models of target and acquirer.
  • Connectivity of operations, production, business models, customer base, partner base

If there is a direct connection possible between business models etc. a merger makes sense. An example is the connection between an ecosystem of limo drivers of Uber with the transportation ecosystem of another company, because they can easily leverage one another. A special case is a horizontal merger, where companies with a connection of production are merged.
  • Similarity of operations models

How a business operates is a key thing to understand and to integrate a business. the closer an operational model is, the easier it is to integrate. You may use operations maturity models to determine the current and desired state of target and acquirer operations.

  • horizontal or vertical merger (but not a heterogeneous merger)

tbd

Factors in the business case for the merger

  • realistic synergy expectations

In practice, synergies may not come true or may come late or may not come at all! So be realistic in your synergy expectations. Why not start with a likelihood of 50% to reach expectations? It gets you some comfort and buffer. You would still shoot for 100% of synergies, but realistically you will never reach it as planned.

Environmental factors

  • approvals from regulation authorities are available

This is a simple go/no go decision by authorities. But it is important to get the approvals before you get too much involved in post merger integration.

CONTINUE TO HACKING OF MERGER INTEGRATION

(C) Dr. Karl Popp 2015

 

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