Inarticulate ramblings of a management consultant

the day to day experiences of a consultant operating in weird and wonderful client situations

Post merger integration – in every way, an oximoron!

There’s an magnificent irony to the expression ‘post merger integration’ which, as the M&A rollercoaster starts to speed up again at an alarming pace, I wanted to share with you.

In fact every part of that phrase can be challenged…

  • Post – the reality as any practitioner will tell you, is that the work starts a long time before completion and potentially announcement. Many studies have shown that if you start your planning after legal completion, your already slim chances of success are reduced further. In fact, the biggest opportunity for improvement for corporates is to bring considerations of integration into the discussion as early as possible, ideally allowing the process of due diligence to be directed by the integration strategy…if one of the drivers for the deal is to access a new customer base, it follows that diligence needs to be directed towards not just the quantitative aspect of the customer base (spend, share of wallet, demographics, channel etc) but also the qualitative aspects around customer engagement. From there, building a retention and engagement plan which may include pricing and product launch strategies becomes a natural focus for the post completion period.
  • Merger – in 15 years of consulting in the post merger integration field, I’ve probably come across 5 real ‘mergers’ where an attempt has been made to genuinely merge two entities in a sensitive, employee and customer orientated way…one very recently which is already showing the benefits of this approach. The most commonly used and by equal measures least appropriate expression which continues to be used is ‘best of both’ or ‘merger of equals’ as an attempt to present a rational approach to something which has deep political, cultural and people based challenges. Combining the ‘best of both’ presumes that leadership in the merging entities can identify the ‘best’ bits and reach some kind of agreement that they can be accommodated in the entity….not an easy challenge!
  • Integration – probably the most unlikely result in most deals. Assimilation, adoption, coercion might all fit the bill a little better! Seriously though, opportunities for integration exist across a wide range of areas but they do not exist in finance, IT, Operations. The cost of an integrated approach to existing systems is usually enormous and the benefit hard to realise. Where real integration opportunities exist are in some of the people aspects and any effort to integrate here is often met with productivity improvement and higher levels of employee engagement…a great result.

Please don’t read this blog as a challenge to coming up with some new consulting speak to describe the activity. If I could give two bits of advice to anyone charged with doing this programme of work, they would be as follows:

  1. Find a person who is capable, networked and enthusiastic to take responsibility for the transaction from beginning to end (by which I mean, the very end…ie until after integration has been completed). For an activity which has the word integration in it, the amount of times I see a entirely disjointed process with separate and unconnected teams doing individual elements, is remarkable. Having at least one person who has seen it all from start to finish is a good starting point.
  2. Tell it how it is…if we’re acquiring and not planning on adopting any of their kit, let them know early. Humans adapt quickly and well to a logical and well communicated approach, they don’t react well to someone attempting to deceive or mislead them!

Categories: Complex transformation, Functional Leadership, human behaviour, Human Capital, Mergers & acquisitions, Politics, Post merger integration, Project Management, psychology, Systems led change

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4 replies

  1. Ben. Over time your “must read blog” has become more edgy and today’s is brilliantly candid. Striped of management consultant code, the message delivered “en clair” is unambiguous. The rationale of m&A is to grab someone elses share of the pie being either a quicker route, or maybe the only way, to gain targeted market share. Supposedly, if you add 1+1=2 it gets reflected in greater turnover, profits, dividends & thereby enhanced share price. But often this is not the case. Could you illustrate a list of M&A winers & sinners from say the last 10, 20 or whatever number of deals sliced & diced whichever way is relevent? How many achieved the heralded objective of the M&A transaction? Was it less than your led to believe? Of course time heals and over time the shortcomings of the deal are masked, perhaps by the departure of the CEO to seek challenges elsewhere -and the announcement of a new and exciting strategy get talked up – but the deal still failed to deliver to expectatons.
    Deals fail because someone either paid too much or didnt understand that they, and their ways, couldnt hold onto the magic contained within the target. Maybe there are as many shortcomings with pre-acquisition due diligence as post merger integration. Both need to be got right to achieve success whichever way you measure it.

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  2. Hi Alastair, great to hear from you and many thanks for your kind comments. The challenge of measuring success or failure in terms of your ‘winners or sinners’ list is a difficult one, primarily because buyers, understandably, are a little reluctant to give away much in terms of what synergies they’re expecting to achieve from the deal…sadly however, this is often less about secrecy to the market (where the purchase price would potentially move against them to reflect the uplift in benefits) and more about a genuine lack of a properly articulated, carefully managed and socialised, and risk mitigated business case! Without that, it’s hard to measure what’s been achieved. I do understand that this is difficult given the vagaries of information from the virtual data room and limitations on time and resources…

    I’ve been involved in quite a few deals in the past where actually finding the business case was a challenge. Having found it, it was clear that it had been drawn up to pass the investment committee process rather than actually provide a direction for the integration! Again, I can understand that but what I struggle with is that nothing is done to follow up.

    It’s interesting. In major transformation projects which involve systems related change for example, you’re seeing a trend where the money only gets released on the achievement of certain milestones…a gateway process which controls spend based on deliverables. The challenge for M&A is that the vast majority of the spend is delivered on completion and using this as a control mechanism is therefore impossible. What happens therefore is that whatever budget is approved for the integration part of the deal (often an afterthought in my experience) is managed too carefully to try and regain some control, so that whatever benefits there are, are strangled through lack of investment.

    Finally, you may have seen my response to the Mckinsey report on value creation in deals, (https://bendehaldevang.com/2014/06/06/the-latest-ma-analysis-from-mckinsey-part-of-the-problem-or-part-of-the-solution/). This in my view, is every bit as damaging as anything else!

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  3. Ben:
    Once again, you have articulated the lessons learned that unfortunately keep getting re-learned again! Yes, very few deals are true mergers. In fact, in some cases, the press release states mergers more to satisfy the ego of the acquired CEO and Board than to represent the transactions true intent.

    Also, “best of both” is usually beyond human achievement even if the intent is there. It creates more chaos and lack of clarity. Instead, more time and focus should be spent on how the acquirer might destroy deal value by not understanding the acquired company’s success from a systems perspective linked to deal value drivers.

    Accountability also remains a real issue.

    This blog entry genuinely resonated with me. It’s a great introduction to achieving success. Unfortunately, it will be just as valid and truthful today as in the future.

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    • Hi Steven, great to hear from you. It makes me sad that this resonates again with you and others….spending 15 years doing the same thing time and time again and expecting a different result…! For me, the lack of learning is the worst part. Whilst I might not be in a job going forward, at least the needless destruction of innovative ideas, reduction in human productivity and engagement and value might be arrested!

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