Post-Merger Integration: Guide to the M&A integration process (2023)

An old adage compares the M&A process to trying to complete a giant jigsaw puzzle where your right and left hands never worked together.

To put it mildly, mergers and acquisitions involve a multitude of moving parts.

To complicate matters further, suddenly there are two other companies and stakeholders who now need to work and communicate fairly and transparently in order to close the deal.

But what happens after the deal has (apparently) crossed the finish line? What is post-merger integration and how to do it right?

While dozens of companies are involved in their PMI projectsDealRoomwe were able to collect valuable information on this topic.

In this guide, we look at the importance of M&A integration, the process, best practices,Post-Merger-Integration-Software, and the true meaning of post-merger integration.

Last but not least, DealRoom also provides helpful onboarding checklists that you can useFree trial period. More on that later.

But first, let's look at the definition of M&A integration.

More specifically, M&A issues often result in deals failing, or at least being unable to get any real value out of the deals: no one wants a deal that looks good on paper or results in a semi-integrated deal. Company. This is supported by research conducted byMcKinseyin 2016:

"Companies that offer integration will achieve 6-12% more growth than companies that don't"

Most companies enter the M&A process with the best of intentions, but succumb to common pitfalls that derail the deal. It's important to note that over 55% of mergers and acquisitions don't return expected value.

The following M&A spectrum shows how difficult it is to successfully reach the target value early in the M&A process.

With this in mind, post-acquisition merger planning should begin at the beginning of the transaction, and best practices, comprehensive team members, and M&A integration plans should be prepared before the transaction closes.

Who is responsible for M&A integration and other post-merger activities?

1. Executives and Stakeholders

One of the most important post-merger success factors is evaluating mergers from the top down.

at the beginning of, business leaders need to bring together all the potential stakeholders involved in a transaction’s due diligence process: bankers, lawyers, advisors, etc.

And communicate the details of the post-merger integration early on.

Even better, any communication in the due diligence phase during M&A integration must also consider the post-deal integration phase.

2. diligence of team members

Best practices for post-merger integration indicate that people performing due diligence should become part of the team to retain and review information without repeating work or dealing with redundant tasks.

When the same people are used for due diligence and integration, there is continuity, which is invaluable during the often chaotic post-acquisition contracting and integration period.

The benefits of this continuity are numerous.

For example, consider the time it would take for due diligence team members to complete a full data transfer to the team.

• Would all the information really be transmitted?
• What about skipped notes in notebooks that don't transfer?

Of course, even the most well-meaning data transfers would end up with some loopholes and oversights.

Also, let's assume that at best, all the information from the due diligence team gets to the integration team. Will the members really do all this work?

importance of communication

Most likely not, because they will be under pressure and have little time, which in turn will lead to thisknowledge gapsand carelessness.

Therefore, it is important to eliminate broken communications.

That's why acquirers useDealRoomCentralization of all communications, tasks and files in one place, resulting in better collaboration and efficiency across teams.

Consequently the best andmore efficientOne way to integrate is to have an overlap between the due diligence and integration teams.

This model also increases the likelihood that the team will maintain momentum and winsynergies, or "hanging fruit," of the deal occurring within the first 120 days, making it an important M&A integration strategy.

3. Human Resources

More and more M&A professionals understand the importance of M&A integration planning, but operations (even the large acquirers) often miss the mark because that all-important human factor can get lost in the hustle and bustle of modern business.

This misstep can lead to the loss of employees and customers in the very critical early days of integration, when competitors tend to prey on both the target company's employees and customers.

With this in mind, professionals must be ready to implement and communicate important information about the goals, positions and achievements of the employees and the future of the company from day one; Obviously, HR plays an important role in the “people” part of onboarding. .

4. An expert in change management

However, HR cannot do everything; Your acquisition transition plan You will not be successful without change management. The first related ruleBest practices for change managementIs forMake change management your own function.

‍Some of the benefits of having a change management specialist on your PMI Mergers and Acquisitions team are: the buyer gains valuable information about the target company (which can help maximize the potential value of the deal), the target company feels cared for, and employee morale /buying will be improved and secrets will be revealed (ie information coming to light that may be completely unknown to the current leadership), which will help avoid serious and costly problems.

A final note on assembling an M&A integration team and an M&A plan: when selecting a leader, recommendations should come from members of the due diligence team; Remember, good practices and integration assessment come from above after adoption. under.

Many of the biggest pain points and roadblocks encountered during the M&E process can be identified and overcome with the right combination of process, tools, training and project management approach.

The Agile methodology was specifically designed to eliminate many of the risks associated with modern M&A initiatives. A new model for mergers & acquisitions goes hand in hand with a new mindset: Instead of concentrating on pre-planned cost synergies, agile mergers & acquisitions are used as a basiscontinuous discovery and acquisition of values.

In combination with the right toolsThe approach enables sellers and buyers to manage highly unpredictable M&A processes with maximum efficiency and accuracy.

DealRoom Agile M&A Principles

They are specifically designed to address and avoid the pitfalls of integrationDue diligence and parallel integration planning, making it the only project management tool designed to do thisenable collaboration throughout the business lifecycle.

The checklist should include plans for the following: hiring procedures for short- and long-term needs, layoffs, turnover, retention, M&A-IT integration, technology, systems mergers, employee performance tracking, and more

It is also important that those in key positions complete a post-merger integration questionnaire to help them understand and align the goals.

The post-merger integration plan includes:

1. Recruitment Process

• short-term need
• long-term need
• Proceedings
• Benefits/Remuneration

2. Overlaps/redundancies

• Get the best employees
• Cancellations and Cancellation Forms

3. Technology

• new organizational chart
• combine systems

4. Employee Performance

• training plans
• Employee appraisal documents and procedures
• Personalsysteme

Additionally, we've put together this PMI framework that can be even more helpful when preparing your organization for a successful post-close integration.

From production to culture, replicate and use this framework as your reference point and facilitate integration with oursframework for integration planning.

Integration checklist for mergers and acquisitions

This is the most comprehensive post-merger integration checklist on the web.

The best part?

Everything on these lists is based onDealRoomsgreat experience and it works VERY WELL.

We've divided this checklist into sections that cover the key focus areas for post-merger (or post-acquisition) integration.

Let's dive into...

• Post-merger integration checklist
• Checklist for preparing the onboarding plan on day one
• Checklist for legal integration
• ‍

You don't have to implement everything in these checklists, becauseplanningbecause integration means being specific.

In general, though, you need to consider all of the above for a holistic post-integration strategy.

The more effort you put into practice, the greater the chancessuccessful integrationYou will have.

Below you will find more information on integration planning.

How to use this post-merger integration checklist

DealRoom is regularly consulted by companies that have recently completed M&A transactions on how to integrate an acquired companyThe process requires good planning.

In response, we see negotiators using these challenging checklists to successfully plan and prepare their onboarding processes.

To get started right away, select one of the checklists above and click Request Playbook Demo.

Our checklists are full of useful resources like:

• Comprehensive integration playbooks developed by experts
• It ensures that nothing is lost during the integration process.
• Track the progress of the onboarding workflow
• Analytics and reports that matter
• Easily accessible knowledge transfer
• A lot more...

integration planning

The complexity of the integration process requiresgood planning.

McKinsey research from 2016 suggests that even those companies that felt sufficiently prepared to acquire a business struggled1 out of 6 dealersthey feltinsufficiently prepared for integration.

The business environment has changed significantly over the past two decades, but the M&A integration process has stagnated since the 1990s.

Additionally, in the same survey, McKinsey found that companies that offer integration will achieve 6-12% higher growth than those that don't.

plan value creation

Each deal is unique and requires careful planning, from due diligence to post-merger integration, for the acquirer to create and realize value. In the integration more than in any other phase of thePlanning means being specific.

Reference to textbook examples can be helpful, for example, when creating a list of goals.

This is not the case with onboarding, where the details of the buyer-target relationship reflect how the onboarding process should unfold.

In the broadest sense, theTeam responsible for the integration processYou need to focus on the business value drivers and ensure they shape the order and pace of integration.

In general, strong integration planning should pay particular attention to the following:

Enjoy the fruit at your fingertips

Make the core business value proposition your immediate focus. Whether it's cross-selling, upselling, selling redundant equity investments, or anything else, make it easy on yourself first.

value creation processes

Which processes have made the company attractive? Was it the company's product lines, its R&D, its sales and marketing, or something else?

People who create values

Realize early on how important the gear you are buying is to value creation. This is especially important when acquiring service companies, but less important (not least) when acquiring manufacturing companies.

Trust your functional teams

If you have good management, integration often works best on a role-by-role or cross-functional basis. Delegate responsibility to these teams and follow up regularly to check progress.

setting milestones

Whatever plan you create, it's important to define milestones early in the onboarding process. Know what changes are needed and when. As an oft-repeated M&A mantra goes, "Drag makes dirt."

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Understanding the integration spectrum

Although the importance of integration cannot be overstated, the level of integration is a crucial consideration.

Just as it is possible to under-integrate, a company can over-integrate and destroy value by fundamentally changing aspects of the acquisition that made it so attractive in the first place.

Kearneyidentifies four phases that help companies get it right when it comes to integration.

1. Tutoring

The acquired company remains largely disintegrated, with only supporting functions such as payroll and administration under the corporate umbrella. The added value for the acquired company is primarily achieved through access to the acquirer's resources. This form of integration works best in cases where the acquired company has something unique (i.e., a startup culture) that the buyer would only compromise by integrating.

2. Cooperation

Similar to mentoring but with more emphasis on collaborative learning and more capacity for both parties. A good example of this is a large and somewhat complicated tech company that acquires a startup in a field like AI or XR (augmented reality). The startup's output could add value to the buyer's range of products and services, but ideally it could continue as before.

3. Targeted integration

Another step up the integration spectrum is directed integration, which aims to integrate certain features but not others. In contrast to orientation and cooperation, this implies a cultural integration: the acquired company becomes an integral part of the buyer's organization. However, it is important that the value-generating functions do not change. For example store branding or high impact marketing practices.

4. Complete integration

The central idea of ​​​​this article - the full integration of the two companies, in which the differences between them will soon become indistinguishable.

Types of post-merger integration areas

data and knowledge

This area includes a plan for integrating insights such as customer, product, and service data.

technology and systems

Integrating companies need a strategy to combine their technologies and systems. For example, if both companies use different CRMs, which CRM will they use in the future?

Internal Policies

How will the two integrating companies deal with internal policies such as onboarding new employees, salary changes, staff departures, etc.?

business processes

This area includes the strategy behind future business activities, such as B. the acquisition of new companies and future mergers.

corporate culture

corporate cultureIt is the backbone of every business. If a company works from Monday to Friday from 8:00 a.m. to 5:00 p.m. M. at 5 p.m. and the other has flexible working hours and home office days, there will definitely be conflicts. Before the M&A integration is complete, the two companies must decide on the corporate culture that will emerge after completion.

This survey of M&A executives, conducted byjabianled to most respondents saying that culture is far more important than other factors to an integration team working to bring two organizations together.

organizational structures

This area includes the organization of departmental structures. For example, will the two HR departments become one or will they take on different tasks?

products and services‍

Before the integration of the companies, each had its own products and/or services. They must decide whether to continue, combine or eliminate the products and/or services offered and the brand associated with them.

Types of post-merger integration

There are four typical types of post-acquisition integration.

1st recording

Acquisition occurs when the acquiring company takes over the target company completely, including all processes, organizations and procedures.

2. Symbiosis

Symbiosis only occurs in specific areas to achieve the goals of the merger or acquisition.

3. Conservation

The target company remains largely autonomous, although some integration with financial information can occur.

4. Hold

This is the case when the acquiring company owns the target company but they are not integrated with each other.

Stages of the M&A integration process

The post-merger integration process (or M&A integration process) is heavily influenced by the planning, or lack thereof, that occurs early in the transaction lifecycle.

no courseInvestigationThe consulting firm KPMG estimates that 70% of the value of the agreements is associated with thisfailhappens inPostintegrationsphase.

Put another way, billions of dollars are lost each year because of businesses. That's why integration is so important in mergers and acquisitions.

Here is a summary of the process to help you with your M&A onboarding plan:

1. Start planning ahead

M&A integration planning should begin at the inception of the transaction and objectives should be periodically reassessed throughout the integration.

Teams are also built around aligned cross-functional goals. This allows everyone to see the big picture and eliminate common cross-functional dependency issues.

2. Organize a kickoff meeting

A kick-off meeting should take place at the beginning of the business activity. At this meeting, a list of people to be involved in this phase should be drawn up. In this phase, it is crucial to clarify the governance and establish the operational post-merger integration framework for the teams to work together, e.g. B. organizing meetings, managing dependencies and exchanging information.

3. Duty of Care

While due diligence has historically not been classified as part of PMI, successful M&A integrations keep a close eye on their due diligence.

tools like, help businesses, includingSTRENGTHand many others plan PMI before closing the deal.

4. Pre-Closing Review

Pre-Close (again, not a technical part of PMI, but essential for a positive outcome): synergies need to be reviewed and confirmed, and teams and team leaders need to be established.

5. Organize a post-merger kickoff meeting

6. Establish communication channels

Set up communication channels and reports through weekly or monthly stand-ups.

7. Post-Closing Review

The teams review and evaluate the post-acquisition integration through short, steady iterations. This makes it easier to realign a team and its goals as new information emerges.

For a successful merger andavoid general risks, a full plan must be implemented before the deal is closed.

Teams should create an M&A integration game plan and employee checklist, set goals, track progress, and communicate openly.

As mentioned above, DealRoom offers numerousChecklists and templates after integrationwhich you can now see in action for free in our roadmap tool.

However, many teams no longer follow the traditional methodology of integration manuals.

Why manage post-deal integrations like you did 20 years ago?

They create added value for the company by continuously improving the value-added processesAgile strategy methodologyinstead of.

How long does the post-trade integration take?

There is no set timeframe for how long the post-merger or acquisition integration should take.

Every deal is different, so every post-deal merger has its own pace.

It can take months, if not years, to complete the project.

However, no matter what type of contract is entered into, planning is requiredstart early, along with due diligence and prior to closing the deal.

Best practices for post-merger integration and integrated merger and acquisition solutions

no courseInvestigationby consultancy KPMG estimates that 70% of the depreciation from failed businesses occurs in the post-integration phase.

There are many different types of strategies, but here are some general post-merger integration steps and best practices to follow for a successful outcome:

Die M&A-Integrations-Best-Practices-Liste

1. Lighten your workload by having honest conversations and setting a detailed budget

While not every company can have a standalone merger team, there are some things smaller companies can do to ensure key players have a balanced and manageable workload.

In order for tasks to get the attention they need once they are taken over, honest conversations between workers and corp-dev must be had.

What can really be achieved?

Are there mundane tasks or projects that can be outsourced to other employees while specific people work on the merge? In some cases, companies may consider hiring and budgeting for temporary workers.

The budget must be analyzed very carefully and with realistic eyes.

2. Use agile-inspired practices and sequences to

• Set clear expectations

The lack of clear expectations can lead to chaos and negative emotions in mergers and acquisitions. Fortunately, expectations can be set by prioritizing tasks for the business integration plan, leading back to the main goal.

More specifically, the power of asking the right questions at the right time can be harnessed through daily or near-daily sequencing and prioritization with the target organization. This will be intimidating at first for the target company and maybe for you too, but the benefits are immense.

Most importantly, this style of sequencing puts focus on the goal and only the tasks related to that goal; Unnecessary labor is also eliminated, reducing shop fatigue.

Although the target company may initially be tired of daily contact, they will eventually reap the benefits of focused practices and experience the mental joy of seeing the to-do list shrink.

• Bring important issues to the fore earlier

Another benefit of sequencing, which follows directly from the points above, is that having more contact with the target company about priorities allows critical conversations to be had early in the business lifecycle.

Narrowing down priorities (not everything can be high priority) allows stakeholders to see the reality of the business (what will and won't happen in the future) and reduce churn because it's clear from the start that not everyone gets , what he wants. Wish. Do you want the deal?

• Save corporate morale

Just as people respond to changes in their personal lives with a variety of emotions, they also follow a pattern of emotional responses to changes in their professional lives.

Although the change curve models use slightly different terminology, experts agree that when faced with major changes at work, workers often go from denial to anger and depression, and hopefully to periods of acceptance, hope, and commitment.

In simpler terms, when changes are implemented or mergers and acquisitions occur, morale often plummets, workers worry about fears and doubts, and productive work suffers.

Agile can help with this, as some have shownExamples of post-merger integration, namely the acquisition of Disney-Pixar.

This M&A integration was particularly successful because employees didn't feel like their entire world was changing in a short period of time; Instead, the changes were rolled out slowly and methodically based on their order of priority.

Strong corporate morale is critical to any PMI structure.

3. Use M&A tools that can also serve as post-merger integration tools

While a tool is never a panacea for a team's M&E problems, the right M&E tool and software ishe canAccelerate the M&A onboarding process and produce valuable data for teams.

VDR and project management platformsspecifically designed for mergers and acquisitions, such as DealRoom (for deals of 50 million and more) and FirmRoom (for deals of less than 50 million) You can literally keep all parties and new hires on the same page. Executives can no longer simply rely on Microsoft Excel when more efficient tools and technologies become available.

In fact, DealRoom's PMI tools can be used to meet your merging needs as it is a process management tool with an overlayDue-Diligence-Management. When buyers or banks use DealRoom, they see better collaboration and a massive reduction in emails.

Continuing to use DealRoom with post-closing activities allows your data to be reused, and the tool itself can help eliminate duplication of effort, a common pitfall that slows down the entire process and wastes valuable employee time. In particular, items can be flagged during the due diligence process for M&A integration.

4. Arrange one-on-one meetings with employees of the target company

Successful merger of mergers and acquisitions The practices do not overlook the fact that a focus on change management, as noted above, is an essential part of the M&E integration plan.

5. After about 6 months, conduct a climate survey with a questionnaire on post-merger integration and present the results to the executives

Many stakeholders have fallen into the delusion of ignoring the power of sound integration and change management practices.

In fact, with smaller transactions, the buyer sometimes gets away with more sloppy methods and overlooks the important legwork involved in properly managing the change.

However, as the company grows, ignoring change management will surely lead to itproblems after the takeover.

The fact is, large organizations need strong change management practices. Experts recommend that employees receive a climate survey for about six months. Here, too, the collected data must be analyzed and the feedback sent in a report to upper management.

This allows management to see what is going well and what needs to be addressed or improved upon so that the integration process continues in the right direction.

6. Finally, don't rely too much on these infamous M&A post-merger integration "playbooks":

While there has been a growing desire for business "playbooks" in recent years, the notion of playbooks has begun to take on a more negative connotation in the industry as no two companies are exactly alike.

It's impossible to have one PMI model for all aspects of a business, as every business involves different people, emotions, products, and risks. Even if your target company is very similar to a previous target company, keep in mind that a current deal may be different as you, the acquiring company, may have changed.

It could even be said that the desire to follow an M&A integration playbook is dangerous for the company itself, as it can lead to narrow-mindedness, undermine overall direction and client relationships, and fail to recognize the uniqueness of each company: all of this will be jeopardizing the maximization of business value. Instead of resorting to playbooks, try shifting your mindset to be a little more agile or flexible and consider PMI frameworks and other tools.

While playbooks aren't ideal for the choppy/uneven world of mergers and acquisitions, the basic gameplans and structures are relevant. It is both practical and humane to look at previous agreements and see what does or does not apply to your current contract.

In this post-merger integration framework, you'll often want to know how the M&A process will begin and who will be involved, but everyone involved needs to realize that the precise approach is one that they will all work together in an agile way to achieve discover. .

Through discovery and analysis, the post-merger integration framework should give time to understand the customer and the target company, which is a major advantage of Agile: teams become more efficient and much more customer-centric.

M&A Integrated Solutions und DealRoom als Post-Merger-Integrationstool

Poor post-deal integration practices are the leading cause of PMI failure. DealRoom helps you avoid common post-acquisition pitfalls and increases the chances of a successful post-merger integration.

The platform allows users to plan accordingly from day one and from the start of the due diligence process. Teams have access to all files and data before the deal closes, allowing them to identify problem areas and plan accordingly.

IsDealRoomAlso, users can define cross-cast dependencies for different functions. All members of the deal team can track the progress of the deal in real-time.

This allows employees in key roles such as managers, department heads and HR departments to access information and updates on a regular basis.

DealRoom also has a PMI plan template that users can download. Are you ready for a better process to maximize business value? Order our M&A integration software today.