Adapted from Five Considerations for Your M&A Integration During Coronavirus, originally published in 2020
Almost every M&A deal is based on the promise of achieving certain synergies—reducing costs through economies of scale, implementing operational efficiency improvements, combining human capital, integrating technologies, the list goes on. The expectations for these synergies inform, to varying degrees, the terms of the agreement. For publicly traded companies, they also inform the stock price and marketplace activities. But what happens when those expectations don’t come to fruition? For some companies, a mismanaged merger or acquisition can mean taking a financial hit or dealing with a less-than-ideal organizational structure. For others, the impact can be detrimental.
While there’s no seamless way to bring two companies together, there are steps you can take to ensure that the early integration phase is prioritized appropriately and executed well. By focusing on this integration phase upfront, you can better position your company to realize the expected M&A synergies.
Three Questions to Help Realize M&A Synergies for Your Organization
1. What commitments have been made to the marketplace?
When a merger or acquisition is announced, companies often make commitments to achieving future savings or operational efficiency. These commitments inform shareholder decisions and, as a result, become some of the most highly tracked and important outcomes of early integration activities.
Planning a successful integration program starts by acknowledging the commitments made to the marketplace, the shareholders’ expectations, and the probable outcomes of the integration. Are there discrepancies? If so, what steps can be taken to re-align what’s expected to what’s realistic?
2. What plans have been made for an Integration Management Office (IMO)?
Acting much like a Project Management Office (PMO), an IMO is set up to focus exclusively on integration activities. Establishing a central planning and communication point is particularly valuable in the early stages when legal stipulations can limit cross-company communications.
The IMO is responsible for setting attainable goals and creating plans to achieve them. Depending on the IMO’s scope of work, this group may oversee the end-to-end integration of technology, processes, departments, networks, and supply chains. Because of their insight into each of these activities, your IMO can also serve as a valuable partner to help prioritize initiatives.
Investing in an IMO—and in the related integration activities—is expensive. It’s important to remember delaying a well-researched, thorough integration plan can lead to lost revenue and, over time, the compounding cost of unrealized savings.
3. What is absolutely required on day one, versus nice to have six months later?
Your day-one priorities should directly tie to why the deal was deemed valuable in the first place. Over the course of negotiations, it can become easier to see the full suite of possibilities that an acquisition offers. Perhaps the new company owns IP that can enhance one of your products, or they have access to a region you’d like to tap into one day. While the prospects are exciting, chasing “nice to haves” too soon can derail your “must haves.”
Even efforts like migrating email domains or granting appropriate application and system access can be deceptively complex and time-consuming. Ensure critical resource groups, like IT teams, can focus on making sure the top priorities are taken care of first. Leveraging this clarity of purpose can encourage a sense of calm amidst a period of significant organizational change.
Realizing the value of an M&A deal often comes down to a successful integration program. However, more often than not, integration activities are significantly more complex than they appear. Our teams can help find clarity in the complexity. Fill out the form below to connect with one of our consultants.
By Susanne Turnbo