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Business professionals discussing mergers and acquisitions.

Post-merger integration: Critical factors for creating value

June 9, 2023 / 6 min read

An acquisition can transform an organization, sparking heightened success and profitability. But many companies fail to fully integrate the acquisition with its current business. We share critical success factors for post-merger integration to help realize deal ROI and maximize value.

An acquisition can transform an organization, sparking heightened success and profitability. But many companies falter when it comes to integrating the acquisition with its current business, and this can have long-term detrimental impacts. Whether you’re aiming to expand your footprint, grow your capabilities, or leverage cost efficiencies to leapfrog competitors, acquisition integration is crucial to realizing full deal ROI and maximizing value.

Put simply, integration entails combining key functional areas of the two organizations, including people, processes, and technology. But too often, business leaders underestimate the complexity, resources and project management expertise, and the time it takes to do integration right.

Leaders and staff alike tend to be fatigued after rounds of due diligence or don’t have the M&A experience to zero in on the best place to start. With so many organizations facing talent shortages and staff already working at — or beyond — capacity simply to manage day-to-day operations, integrating a new business can quickly overwhelm.

Drawn from our work of integrations over the last several decades, we share critical success factors to realize your full deal ROI and create more value from your acquisition.

1: Defining your acquisition integration strategy and plans pre-Day One

Integrations require rigorous planning, and that should begin well before day one. Business leaders often wait too long to begin, and that can create significant obstacles down the line.

Your first 100 days is the optimal time for action — the team is focused, the sense of possibility energizing. But the shine of the new inevitably wears off and as those 100 days pass, people begin falling back into operations as usual. Businesses that don’t have a strategy and detailed plans in place prior to Day One are likely to underachieve, with the deal not performing the way you intended.

Leverage the knowledge you gain and momentum from due diligence to flow seamlessly into the planning process. Articulate why you’re making the acquisition. What’s the deal thesis? What is your value creation plan? The answers should define and guide your integration strategy, and translate the “why” behind your acquisition into quantifiable integration objectives and, in turn, specific integration plans.

You’ll also need to identify cost- and revenue-related synergies — even if that wasn’t a primary driver for the acquisition. And you’ll need to define your target operating model prior to diving into detailed planning for each functional area.

2: Communications and planning for the people side of post-merger change

It’s one thing to run financial models in spreadsheets when you’re searching for a target; it’s quite another to bring those expectations to the organization and motivate individuals to realize them. Proactive communication with all key stakeholder groups is absolutely crucial. In particular, every employee wants to know, “What does the merger mean for me?” Staff immediately wonder about job security, reporting relationships, and potential changes to comp and benefits.

Address questions early, ideally 30 to 60 days prior to announcing the deal, to help ease concerns and remove ambiguity about what post-Day One will look like. It’s okay if you don’t have all the answers yet, but people want to hear from a trusted source — you — and not through office gossip, on social media, or from another external source.

Of course, not everyone will be happy. That’s why your plans should include strategies and tactics to address areas of change resistance and cultural differences between the two organizations. Remember: Managing the people- and talent-related aspects of integration is equally as important to deal success as the process and technology aspects.

Featured on Middle Market Growth: Discover how our integration expertise helped transform local competitors into a unified company.    

3: Understanding that integration looks different for each function

Marketing, sales, HR, finance and accounting, supply chain, quality, engineering — what integration looks like for each function of your combined business will differ. For example, you might decide to keep both sales teams “as is” but integrate the HR departments to optimize that function.

Within each functional area, you’ll have a vision to create and many decisions to make around:

Envision what the combined function should look like, build out your project plans to address these areas, and then use those plans to integrate successfully.

4: Prioritizing and balancing acquisition integration efforts with operational responsibilities

Unclear priorities are showstoppers. Organize key integration milestones within certain specified time periods, such as 30, 60, or 90 days from Day One. You want to capitalize on Day One momentum, but you want to be cognizant of the fact that it will be impossible to implement everything in that time frame — so a focused, phased plan is key. Instead of messages like “Keep pushing forward,” spell out the organization’s top three integration priorities at any given time — and where those priorities fit in terms of function so that everyone pulls in the same direction.

Do as much as you can in those first 100 days, but don’t underestimate the amount of effort it takes, and above all, stick to your plan. Burnout is real, and although you want to accomplish as much as possible, you’ll likely need to make adjustments so your day-to-day business operations don’t suffer. That means keeping the lines clear between “integration” and “operational improvement” projects. As you carry out integration plans, your people will identify improvements that could be made. But those often require longer-term efforts; fold them into integration, and you’ll never finish.

Prioritization around key milestones means other things may not happen in the same time frame. It’s a balancing act, often a delicate one, and it’s the reality of integration, because — see above about not burning out your people.

5: Clarity, structure, and oversight begin with your integration management office

Whether you oversee your integration initiative in-house or turn to external expertise, you need air traffic control. This is your integration management office, or IMO, and it should include a clear integration leader working hand in hand with an executive steering committee. In addition, the entire C-suite should be engaged and provide support throughout the pre-Day One planning and integration process.

Your IMO is charged with, well, everything: setting the vision and strategy; translating the deal thesis into integration objectives and detailed project plans; communications and change management; defining roles and responsibilities at the leadership and function levels; selecting resources for those roles; and setting clear — and reasonable — expectations around the organization’s commitment to integration.

The IMO defines and guides integration management with a clearly defined process and actionable, properly supported plans. It creates tools and templates to capture and report key data through impactful dashboards to help the executive steering committee make rapid and informed decisions. The IMO sets the update cadence and facilitates meetings and cross-functional collaboration. It identifies and helps resolve bottlenecks. In short, your IMO focuses your integration efforts, relieving the administrative burden of more traditional project management.

We can’t overstate the importance of successful acquisition integration. Mergers that don’t meet expectations often can be traced back to a failure to fully integrate and capitalize on synergistic opportunities. In fact, we see buyers turning away from deals in which the target entity hasn’t integrated prior acquisitions. That said, when done correctly, the results generate tangible benefits: a clear path forward that sets up the newly combined organization to create real value for all stakeholders.

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