How to Drive Greater ROI with Exceptional Post-Merger Integration Planning & Execution
09/20/2024Companies benefit from mergers and acquisitions in one of two ways:
1. They increase top-line revenue.
2. They operate more efficiently and cost-effectively.
In either scenario, it’s critical that you understand where the value of your acquisition lies and have a plan to achieve it. You need a clear strategy to integrate and leverage the talent, products, real estate, processes and the core operating systems that produce the intended synergies.
Unfortunately, we see companies go into acquisitions unprepared for the work ahead and ill equipped to drive post-merger-integration actions efficiently and effectively. As a result, they spend months or even years and millions of dollars recovering from their mistakes.
As you go through the requisite due diligence efforts, it’s crucial to understand how to realize a better ROI on your combined company. We can show you how.
The Post-Merger Integration Process: 5 Areas Where Companies Fail
Ben Franklin was right: if you fail to plan, you’re planning to fail. Companies that rush to legal day one of the close often discover that they aren’t ready for day two and the post-merger-integration efforts ahead. Here are some of the ways post-merger acquisitions go bad, quickly:
1. Lack of an Integration Strategy, Scope and a Plan
● Problem: High level assumptions that don’t get distilled into clear pieces of actionable work waste time and leave teams swirling.
● Solution: Leverage intentional workshops with cross functional teams to distill how to make the deal assumptions a reality. You’ll create an aligned plan and have a clear path forward.
2. Overestimating Synergies and Cost Savings
● Problem: Failing to accurately estimate synergies or how quickly they can be realized leads to missed targets and lost profits.
● Solution: Employ experts to carefully estimate synergies so that you minimize financial instability and avoid unmet expectations from investors, customers, or employees. Ideally, you do this during the due-diligence phase to ensure your post-merger-integration is set up for success. The sooner during PMI this is uncovered, the better.
3. Lack of Clear Leadership and Governance
● Problem: Without clearly defined leadership roles and processes for making decisions and resolving issues, confusion grows, progress stalls, and power struggles quickly arise.
● Solution: Minimize conflict by building a strong integration governance structure that provides teams with clear direction. We call this a Transition Management Office (TMO).
4. Integration Fatigue
● Problem: The integration process is often complex and requires sustained focus and resources. Typically, your leaders and teams have “day-jobs” to keep your existing business thriving and they don’t have time (or sometimes experience) for the intense post-merger-integration efforts asked of them.
● Solution: Deploy a dedicated integration team with clear objectives to drive your ROI while taking care of your people and mitigating employee burnout.
5. Overly aggressive Transition Services Agreement (TSA)
● Problem: Poorly negotiated or ambiguous TSAs can lead to service disruptions, operational delays, unnecessary costs, and strained relationships.
● Solution: Spend the time to distill your approach and draft an execution plan so that the acquiring company has confidence in the TSA exit date(s) and can mitigate financial and operational risk.
How PMI Consulting Services Can Help
A management consulting firm with the right pedigree can mean the difference between smooth PMI execution and a drawn out and costly deal-gone-bad.
Drafting and executing a PMI plan that gets your return on investment requires a team of experts that understands your goals as well as the challenges keeping you from them. You need vision and leadership that will keep the integration and budgets on track so that all stakeholder expectations are met along the way.
5 Key Considerations
1. Experience: Don’t entrust your acquisition integration to an eager start up. Go with an established and proven firm that has built their reputation by planning and executing a diversity of acquisition integrations.
2. Resume: Work with consultants that have a proven track record of success working with companies like yours.
3. Referrals: Talk to past clients to understand what they liked or didn’t like about their post-merger integration process.
4. Value: Find a cost-effective solution that works within the budget you’ve set but delivers the value you need.
5. Solutions: Make sure your post-merger-integration firm understands your unique challenges and writes a playbook specifically for you.
3 Services that Make the Difference
1. Transition Management Office (TMO): Think of this as the master of ceremonies. Your TMO manages and governs all aspects of your merger from assessment and early planning through the PMI execution phase.
2. Functional Leadership: Use subject matter experts that work alongside your teams to plan and execute specific functional scope (e.g., HR, Marketing, Supply Chain, Technology).
3. Workstream Execution: Once your plan is approved, make sure that you have a team that can execute the work efficiently while your employees keep daily operations humming along.
Harmonize Your Acquisition and Avoid the Unexpected
Navigating the integration of an acquisition is a grueling process that requires a high level of focus. Ultimately, you need to bring harmony to the various teams, processes, and systems used by each organization so that they deliver a higher return on your investment.
At PCG, we offer a comprehensive list of services to help owners and leaders transition through mergers and acquisitions to transform their companies into something more profitable. We step in with can-do leadership where existing teams are already occupied with day-to-day concerns to ensure every aspect of your merger is carefully managed without setbacks or surprises. Let’s talk today and prevent common PMI missteps your competitors take.