Mergers and Acquisitions

Change and Integration Management with Mergers and Acquisitions

Mergers and acquisitions are globally gaining ground again and the failure rate remains high. Today more than ever, companies are facing the challenge to deliver excellent products and quality and to integrate any form of change in the entire organization anyway.
According to a worldwide Roland-Berger study of more than 130 seasoned PMI managers from 15 branches of industry, the lack of synergy management and thus, incomplete integration as well as insurmountable corporate cultures are the main reasons for failed PMIs. In 2015, based on experience values, the three Roland-Berger-strategy consultants Michel Vlasselaer, Francois Castelein and Nicolas Vassaux identified nine key factors for success to guarantee successful integration before and after the deal.

In 2014, the global M&A-deal volume rose to 3,230 billion US$, about 48% compared to the year before. The share of transnational mergers and acquisitions was 1,400 billion US$. Besides, the size/value of the deals rose significantly, which makes the M&A integration even more complex. Companies join with foreign enterprises in big acquisitions. Europe and the USA proved to be the most attractive target markets for Chinese companies because they offer access to new market segments, more progressive technologies and mainstream markets.
Still, the disappointment is high: many companies cannot manage to reach the synergies to the planned extent that they expected before a merger.
The lack of synergy management, incomplete integration and cultural differences are the main reasons for failure. This leads to three consequences:

The lack of synergy management is often based on erroneous assessments of synergy potential, unprecise ideas, lack of strategies and business models, unclear priorities concerning integration from day one, as well as no commitment in the organization or wrong-going cross-functional projects like e.g. social plan or IT-system integration. Thus, consequence number 1 are missed PMI goals.
The incomplete integration of cultural differences and often a non-existent retention plan to bind key people leads to consequence number 2: loss of key persons.
Postponed and hesitant communication about the new corporate culture and thus, disorientation, paralysis and lacking concentration on business continuity leads to consequence number 3: bad performance in the day-to-day business.
Based on experience values, Roland Berger Strategy Consultants identified nine key factors for success to ensure successful integration before and after the deal and to counteract the three consequences effectively:

          Consequence number 1: missed goals

  1. Defining vision, strategy and business model: the development of a vision of the future, the strategy and the business model has to take place before a potential deal is made. Merger partners have to communicate the fusion’s/merge’s backgrounds quickly and convey them internal and external stakeholders.
  2. Defining synergies: Which kinds of synergies should be dealt with primarily – earnings synergies, cost synergies or technology transfers? The optimal level of integration between merger partners (business model) has to be defined precisely in order to realize the full potential. Each synergy needs a different level of integration.
  3. PMI-process clarity from day one: Defining an integration project and a top-down master plan that regulates priorities and the planning of work after the acquisition. Committed project managers (e.g. in pairs from both companies), implementation teams under the CEO’s direct supervision as well as the identification of risks are part of this.

    Consequence number 2: loss of key persons
  4. Developing culture: people and culture are at the base of an enterprise’s. so, it is about identifying the kind of corporate culture that is accepted by the merger partners.
  5. Ensuring staff retention: founding an internationally successful organization includes two basic requirements: first, being able to hold key persons (e.g. those who have technological know-how and know all facets of the organization), especially leaders who can work internationally.

    Consequence number 3: bad performance in the day-to-day business
  6. Ensuring ongoing business: during a merger, a company’s management is often under time pressure to keep up the business dynamic, define a clear strategy and vision, set strategic integration priorities, identify synergies, assess and evaluate cultural differences and work out an integration master plan. Proactive communication, dialogue and simultaneous management of business goals help employees to stay focused on the customers and the business during the PMI process.
  7. Establishing a PMO (master plan): “The right thing needs to be done at the right time”. Unrealistic deadlines or a lack of adequate resources can easily bring the entire process to a standstill. So, a strong PMO (Project Management Office) team with carefully chosen leaders involved on an early stage of the process stands in the first place.
  8. Communicating proactively and leading a dialogue: communication and dialogue need time and therefore, they are often out of the focus. So, it is about counteracting office grapevine, paralysis and distraction, recording questions and operating all communication channels. Unfortunately, there are few PMI processes with communication and marketing roadmaps.
  9. Developing processes and organization: planning and organizing the merger also means to include the middle management. The merger partners’ integration goes hand-in-hand with transformation and optimization. The goal should not be the alignment of processes but rather their optimization: identifying the best approaches and pragmatically realizing quick improvement suggestions.

Last but not least, it should not be a surprise that M&A can change an organization’s management and thus can lead to insecurities in employees, customers, suppliers and other partners. This is an emotional aspect that usually causes resistance against the change. To reduce this, a transparent Culture Gap can support the process of change.
Think Act: PMI, Roland Berger Strategy Consultants SA/NV
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