Book Recap: The Complete Guide to Mergers and Acquisitions – Timothy J. Galpin & Mark Herndon

Integration: The Real Deal

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Merger and acquisition (M&A) deals have become a part of daily business, yet most M&A deals fail to achieve their intended goals. Merging two organizations is an inherently difficult process that demands effective planning. A well-managed, structured approach leads to faster integration, lower costs and higher achievement.

“The first rule of mergers is that there is absolutely no such thing as a merger of equals; one of you is always the big kid on the block.”
One M&A method, the Watson Wyatt Deal Flow Model, lays out five parallel, linked stages:

The formulate stage – Set out concrete business objectives and growth strategies.
The locate stage – Seek target companies along a logical path; look for synergies.
The investigate stage – Perform due diligence on the target company.
The negotiate phase – Address bridging and transition services.
The integrate stage – Both organizations must decide how fast to move, how to keep the focus on customers and how to communicate with stakeholder groups.

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Integration Begins with Due Diligence

Often M&A deals fail due to ’people’ issues and clashes of organizational culture. The neglected area of due diligence can have an enormous impact on post-merger integration, including initial risk factors, organizational culture and human capital

“Merger integration is like pulling off a bandage: It can be slow and painful, or it can be fast and painful.”
The very notion of due diligence is evolving to include both traditional and non-traditional elements:

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The first non-traditional element is basic integration risk. Can these two companies really be blended? Can both organizations fulfill their strategies?
The second element is a comprehensive cultural analysis to discover whether the organizations are willing to adapt their practices in order to merge.
The third non-traditional element is a thorough assessment of both companies and the human-capital-related risks of the deal. The two companies must align approaches to human-capital issues to motivate the new workforce.
“A failed merger is, more often than not, a failure of leadership.”
One experienced acquirer uses a six-step approach to cultural due diligence. Begin your process with initial planning, and internal and external document research. Then, your company should set interview guidelines and data-collection plans for preliminary research that identifies critical issues. After you collect data through interviews with key executives, convey the information to your company’s integration manager and officers. Your next step is a kickoff meeting with task force leaders to set up the transition.

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Welcome to the Big Leagues of Change Management

Focus on seven change management concepts in merger integration:

Address “me” issues quickly – Performance, morale and productivity usually decline as people worry about their futures. Move fast to clear up uncertainty.
Apply clear, defined leadership – To help everyone get back to business, a single skilled person, with clout and the respect of both companies must be in charge.
Provide extensive communication – Tell people the direction of the company, the purpose and timing of the merger and their specific tasks.
Ensure a focus on customers – Organizations turn inward after a deal is announced. Maintain high customer-service standards; use special incentives if necessary.
Make tough decisions – Tough problems don’t have perfect solutions, be decisive and move.
Create focused initiatives – Coordinate all elements of the combined organization.
Manage resistance at every level – Keep people informed so they’ll understand goals, and have the ability and willingness to reach them.