10 Tips to Ensure a Successful Post-Merger Integration

Michael Klawon

28.October 2023

~ mins. reading time

Mergers and acquisitions (M&A) are transformative events for organizations, but their success hinges on effective post-merger integration (PMI). Navigating the complexities of combining two or more entities requires extensive experience, a strategic approach and careful, but rigorous execution. And since the PMI is so crucial for companies and stakeholders, we analyzed a bunch of different sources and distilled success factors as well as tips to ensure a successful PMI. First, we want to look at the success factors and then discuss the practicable tips in order to be successful.

The success factors have been sourced from fifty company representatives who have executed over 260 deals in recent years, according to a study conducted by Price Waterhouse Coopers. Essentially, successful deal makers demonstrate excellence in four key areas that differentiate them from unsuccessful counterparts:

1. Synergies Achievement: Successful deal makers focus on achieving synergies from mergers and acquisitions, ensuring that the combined entities work harmoniously to create added value.

2. Timely Integration: They prioritize completing integration within an ambitious timeframe, demonstrating efficiency in merging processes and operations.

3. Culture and Change Management: Effective management of culture and change is a crucial aspect for successful deal makers, as they navigate the challenges of merging different organizational cultures.

4. Strong Project Governance: Implementing robust project governance is a hallmark of successful deal makers. This enables them to meet set timelines, synergy targets, and expectations related to culture and change more consistently.

High performance in these four dimensions significantly enhances the likelihood of achieving return-on-investment (ROI) objectives. ROI serves as an effective indicator of post-merger integration success, encompassing various success factors. Furthermore, these dimensions are interconnected—strong performance in one area often corresponds to excellence in the others. Notably, companies with strong project governance excel particularly well across all dimensions, consistently meeting timelines, synergy goals, and cultural expectations. It is worth to be mentioned that M&A teams that used digital M&A suites are usually primed to be quicker and more efficient with regards to using resources.

Navigating the intricate terrain of PMI requires strategic finesse. Based on the success factors mentioned above, we invite you to read our top 10 expert tips, derived from real-world experience and in-depth research. We are the complement to how a digital M&A platform can help you excel (smart tip).

Tip 1: Set up an experience PMI office

An experienced PMI Office is key to ensure a timely start and smooth execution of a M&A project. A PMI is very complex, because it entails many different workstreams, it involves a lot of people and therefore requires people that have done the job before. A PMI shall be led by an adept integration leader that is leading a cross-functional group covering finance, operations, HR, IT, culture management and all other workstreams in scope of the PMI. They are responsible for crafting a detailed integration plan, oversee its execution, manage challenges, and maintain transparent communication with stakeholders. Agile and responsive, the PMI Office adjusts strategies as needed to achieve synergy and business goals effectively.

Smart tip:

Within your team, you'll encounter a diverse range of experience and expertise. Leverage M&A Playbooks to seamlessly implement top-tier practices, guaranteeing that even newcomers are equipped with comprehensive guidance every step of the way.

Tip 2: Define governance and roles and responsibilities in deal team

Defining a rigorous governance model with roles and responsibilities ensures that everybody knows what to do. A best practice governance model defines the rights of way and decision makers in the project organization. A PMI team consists of many different functional and non-functional experts and leaders. Make sure to define their roles and responsibilities properly Recommendation: Use a RECI model that defines who is Responsible for different activities, who is Executing tasks and who is there to be Consulted or Informed.

Smart tip:

Let's circle back to the vital aspect of rigorous execution. Achieving accountability and effectively assigning tasks demands a streamlined system for monitoring the progress of implementations. Given the multitude of tasks involved in M&A integrations, an M&A Integration Management Playbook becomes an indispensable tool.

Tip 3: Prepare Day-1 before Day-1

Successful post-merger integration starts with thorough pre-closure preparation, including planning before announcing the acquisition. Closing Day and Day 1 (legal ownership) are critical milestones. You need to prepare a detailed Day 1 action plan, prioritizing key pre-closure workstreams like HR, Communication, Finance, Legal, and aspects of Technology, Operations, Sales, Research, and Product Development. Efficient planning includes risk identification, mitigation strategies, and a detailed Day 1 schedule. And finally, designing a target operating model pre-Closing Day aids communication and future planning.

Smart tip:

The significance of Day 1 and the subsequent days cannot be overstated; they represent probably the most crucial milestone in your new ownership. Ensuring smooth operations and preventing oversights are paramount. To achieve this, incorporating a (digital) Day-1 readiness checklist is imperative.

Tip 4: Design future organization, manage change and communication

Effective HR management is crucial for successful post-merger integration. Early planning is key, involving identifying key personnel, engaging them in the integrated company's vision, and reshaping contracts and career paths. Simultaneously, non-essential employees must be identified for potential restructuring, seizing the chance to build a stronger team. Creating an integrated organizational structure is also important, with careful design to minimize disruption and uncertainty for employees. Then, design a comprehensive communication plan. This plan should cover internal and external stakeholders like employees, clients, regulators, partners, investors, and the public. This involves materials such as change and communication strategy, transition plans, press releases, CEO emails, FAQs, client messages, and interactive sessions. Proactive communication is crucial to prevent churn of key employees, news leaks and other issues.

Smart tip:

Empower your communication and change management team with extraordinary tools: Change Management Playbooks, Pulse Checks, and cutting-edge online communication platforms.

Tip 5: Ensure timely delivery of milestones and exceed expectations

Timely delivery of milestones helps to reassure stakeholders and investors. A PMI has countless dependencies and is a highly complex project. That is why the importance of planning can and shall not be underestimated. Plan the PMI with digital tools that help you to identify and manage interdependencies and risks between workstreams and plan buffers. Your stakeholders will be very happy if you make a difference by exceeding expectations on time and budget vs. running over it. And: We know from experience that achieving or exceeding public synergy targets within the first year marked successful deals in the past.

Smart tip:

Break free from the constraints of outdated Excel sheets and static PowerPoint slides. Embrace the future with a dynamic digital M&A suite, guaranteeing the punctual attainment of milestones while safeguarding your budget from the pitfalls of manual tools.

Tip 6: Synergy and benefit communication

In PMI, clear communication of synergies and benefits is essential for a seamless transition and stakeholder confidence. Craft a comprehensive strategy that encompasses a clear vision, tailored messaging for various stakeholders, transparency, timely updates, tangible gains, engagement for feedback, visual aids, and a consistent positive tone. Such communication alleviates uncertainties, fosters trust, and ensures a successful integration process.

Smart tip:

Embrace the wisdom of Peter Drucker: "If you can't measure it, you can't manage it". Add value to your M&A project by embedding all metrics and outcomes into your M&A suite. This is your arena for full transparency, and continuous evaluation and improvement that will propel you on your path to success

If you would like to discuss or explore the AI potential in your M&A process, feel free to reach out.

Tip 7: Align IT, technologies and applications

IT and technology infrastructure alignment is pivotal for post-merger success. Modern technology commoditization simplifies implementation and reduces costs, with merging companies benefitting from infrastructure consolidation like data centers for savings and security. The right technology choices reverberate post-merger, especially with application integration. Common applications like CRMs are straightforward to consolidate, while aligning core business applications like ERP systems touching Supply Chain demands careful planning.

Smart tip:

"A staggering 80% of integration costs are often engulfed by IT endeavors. Imagine possessing an actionable blueprint at your fingertips, a compass steering you towards optimal execution.

Tip 8: Plan and report on value

Value sources in post-merger integrations, like synergies, are areas where the combined entity can generate additional value or benefits that exceed the individual capabilities of the merging companies. Here's a non-exhaustive list of value sources commonly found in post-merger integrations:

1. Operational Synergies: Combining operations, streamlining processes, and eliminating redundancies can result in cost savings and efficiency improvements.

2. Economies of Scale: Economies of scale are cost advantages companies experience when production becomes efficient, as costs can be spread over a larger amount of goods A decrease in cost per unit of output enables an increase in scale.

3. Cross-Selling Opportunities: Expanding product or service offerings to each other's customer bases can lead to increased revenue and market share.

4. Geographical Expansion: Access to new markets, regions, or territories, can allow for increased market penetration and revenue growth.

5. Technology Sharing: Utilizing the best technological solutions from each company can lead to enhanced product offerings, customer experiences, and operational efficiency.

Smart tip:

Remember: "If you can't measure it, you can't manage it". Utilize a synergy tracking system to establish accountability and monitor the progress of implementation!

Tip 9: Don’t build a mini-me target operating model

Developing a target operating model (TOM) is a vital part of post-merger integration. This blueprint aligns processes, systems, and people to meet strategic goals. Start by analyzing both merging entities' models and identifying strengths and areas for improvement (brown field approach) or start a TOM on the green field. Design an integrated TOM that supports your strategy and key priorities and design an interim TOM, if needed. Ensure clear roles, responsibilities, and decision-making. Effective communication and stakeholder engagement are key. A well-designed TOM sets the course for efficiency and alignment in the integrated entity's operations.

Tip 10: Maintain organic growth in the first year post-merger

Maintaining organic growth in the first year post-merger is crucial. Successful deals preserve growth, while unsuccessful ones often experienced a dip. M&A teams need to protect and cater to the business momentum during the PMI.