I’ve had a number of very heated conversations with colleagues about the nature of post merger integration in recent weeks. The two positions are easy to understand; on the one hand, there is the perspective that a deal is just another complex transformation project with all the usual challenges. On the other side of the debate, the argument goes that post merger integration represents a wholly different type of challenge which, whilst it contains components and disciplines which are aligned with other complex transformation activities, also has elements which are different. I’m going to make the case for the latter below…and would really appreciate commentary relating to the former if you have a view.
So what is it about post merger integration program leadership that distinguishes it from other complex projects? I’ve come up with 4 reasons…but no doubt there are many more.
- Complexity without clarity; There is a case for saying that many complex projects suffer under a lack of clarity in terms of the ultimate deliverable but in my view, that is due to poor alignment and scoping rather than a consequence of the nature of the transaction. In deals, the reality is that even with the best diligence process, good and frequent access to the vendor in a friendly process, and correct resourcing etc, the nature of anti trust regulations means that your first real view of the organisation you’ve bought is on day 1….and similarly to buying a new piece of technology, learning about it and how it works is a complex task in itself and takes some time. For the program leader therefore, ‘reverse engineering’ a set of targets and objectives over the first 100 days into an investigative analysis process is a critical initial step.
- Find me a stakeholder! I’ve talked previously about the misalignment between the diligence and post deal aspects of a transaction. Those stakeholders who are involved in the decision around going ahead with a transaction often disappear post completion. I wouldn’t for one moment suggest that this is deliberate (!) but ultimately the challenge of who runs the business going forward is rarely answered and more specifically the handover between stakeholders is not managed particularly well if at all.
- Synergies, what synergies? It’s rare in my experience that the business case bears any resemblance to the reality on the ground in terms of synergies. This is not because of any failing on the part of the author of the business case, but more a reflection of the distraction that occurs between a strategic review, a disjointed diligence process and the post deal phase. Too often the integration director is looking at a set of synergies which are at best very high level, based on very early assumptions which have become ‘baked in’ to the business case with little or no further analysis or research.
- Whole company impact;For the acquired business, every employee (and their dependents), contractor, supplier, customer, is potentially impacted by the transaction. Despite all reassurances that the deal is positive and there will be no change in business operations (which is often the case in Asia where I’m based), the history of M&A is such that trust in this statement is very limited. The communication and change management challenge is therefore enormous and stakeholders who, in the eyes of the acquirer, sit on the periphery of the deal because their area is not impacted, require as much attention as those at the heart of it.
This is obviously fundamentally different from those on the acquiring side…where the company will make a deliberate effort to avoid disruption, and where from the perspective of an acquirer, the concerns of employees are more limited because of the perceived strength of their position.
Let me know if you have more to add…let’s try and draw up a more comprehensive list.
Categories: Complex transformation, Mergers & acquisitions, Post merger integration, Transformation
Tags: communications, Complexity, due diligence, human capital, internal communications, Merger integration, productivity, stakeholder management
8 replies ›
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Interesting debate! I’d certainly agree with the four points you’ve made above as good reasons why post-merger integration projects can be different to other business transformation projects. I particularly liked your ” Find me a stakeholder” point. This is often a rushed decision at the last minute once the deal is done. As a result it’s not always coherent and joined up process. I always remember a story where 2 managers from the acquiring firm turned up at the acquired firm on day one, both announcing they were the new MD!
I wonder if another cause for these differences is that what should be one project (the acquisition and subsequent integration) so often turns out to be two completely separate projects; the deal and the integration. I think this links to your first two points. This separation of two wholly reliant phases is unrealistic but happens for many, often justifiable, reasons. However it’s hard to think of other business transformation projects where the costs and the expected benefits are completely fixed (and are often very high) before the project (post-merger integration) has potentially even been considered.
Hi James, thanks for your comments. Agreed re your last point…the lack of alignment between pre and post deal activities has always intrigued me…particularly as the handover is often rushed or limited or both. Single person ownership has to be something to strive towards in my opinion.
“Is it a project or not?”
Ben, I think one of the peculiar challenges that makes it different to other complex projects, is the willingness within organisations to ‘projectise’ the work required in the first place.
I’ve observed executives often prefer to handle post merger integration effort as part of their daily ‘business as usual’ activities.
Now it’s quite possible in this case that individual projects may spring up in IT, Finance or some other department. All trying to integrate their respective parts of the organisational jigsaw. But what they often miss is that guiding hand to shepherd the whole exercise towards a pre-agreed set of business outcomes.
That’s not to say there aren’t good intentions. People genuinely want the best outcome possible but don’t want to incur the project management overhead. But, as often is the case, business life has a way of taking over with other ‘more important’ priorities that relegate the integration effort into the background. And that’s were dissapointments, frustration and reputations get put on the line.
With other complex projects like an ERP implementation, it must be run as ‘project’ with those back-to-basic things like risk/issue management, timelines, deliverables etc. And like any IT related implementation, it’s a no brainer. But for M&A integration it’s not always seen that way.
Hi Toby, thanks for your thought provoking comments…it is extraordinary how for what might be one of the most complex of projects in the work life of many people, there is an expectation that it can be completed alongside BAU. In my experience, this is not a reflection of what those involved really think, but entirely based on a lack of budget for integration activities. Too often I’ve sat in planning meetings where it’s become obvious that there has been no thought about the cost of integration…or if there has, the individual with the responsibility has not had the opportunity to raise the matter with senior stakeholders. Bizarre!
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Will do, thanks John