Post-Merger Integration

Post-Merger Integration: How to Burn Money Securely! These are the 7 biggest mistakes after a company takeover!

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What is the safest way to burn money? The Post-Merger Integration (PMI) to be neglected! It's that easy to put it in a nutshell.

When the hands are shaken after the notary appointment and the buyer and seller walk contentedly to dinner, the actual work really begins the next day. How do I integrate employees and corporate values of the acquired company into my existing corporate structure and culture? How do I standardize contracts with acquired customers? How do I establish my structures and processes?

This important process after the completion of the corporate transaction is referred to as post-merger integration and is far too often not properly "managed". These 7 mistakes must be avoided.

1. The employees are not taken along!

The most important point is certainly the correct communication of the takeover in the acquired company. As soon as the "cat is out of the bag", things get restless in the acquired company. Fear and uncertainty are rife. Employees are wondering, "What does this mean for me?" "Will I keep my job?", "Will I get a new supervisor?", "Will we stay at the location?" Many questions and a great risk for the buyer. This is because insecure employees are susceptible to new offers or resist. The only right way is open communication.

The executives of the acquired company should be informed about the next steps on the first day if possible. As multipliers, they are the linchpin to keep employees in the company and to reduce resistance to takeover and integration. Because let's not kid ourselves, as soon as the transaction is communicated, competitors and recruiters will openly approach employees to take advantage of this uncertainty. The more time that passes without the uncertainty being clarified, the more expensive it becomes for the company. Top performers and know-how could be lost.

2. There is a lack of a post-merger strategy!

The buyer would therefore do well to prepare a post-merger integration strategy in advance. Certainly, this is already a big plus point in the context of the discussions with the seller. After all, potential sellers also want to know what will happen to the company after a sale. Especially if only a partial sale takes place or he/she continues to work in the company for a while as part of an ear-out.

If such a strategy is missing, chaos is inevitable and once again you waste valuable time that you don't actually have.

A post-merger strategy is primarily aligned with the overall strategy that lies in the acquisition of the company. This also determines the depth of integration, i.e. the question of whether the company remains independent or is fully integrated into the buyer's company. However, three areas are usually always part of post-merger integration:

Such a strategy could include the following points and be part of a post-merger integration checklist:

Employees & Know-How

  • Information events after closing, where the buyer introduces himself and also roughly outlines his plans with the acquired company.
  • Separate welcome page on the intranet for new colleagues, which also contains FAQs (frequently ask questions).
  • Presentation of teams in open question and answer sessions
  • Identification of key players and Konw-How carriers and early involvement of them in the integration process
  • Contact point for questions from the Belgschaft. Low-threshold offers for contacting the human resources department (HR) are suitable for this purpose.

Brand & Customers

  • Should brands be continued or standardized? When will the brand be replaced?
  • Can customer contracts be retained, or do they have to be renegotiated ("change of control" clauses)
  • Prompt personal communication with customers

Structure & Processes

3. Synergies are not implemented

The buyer will plan a large part of the purchase price for planned synergies that he intends to use with the purchase. It's just stupid if you don't leverage these synergies (enough) in the end! The synergies identified should therefore be implemented stringently within the framework of a corresponding project. The ACTUAL must be compared with the PLAN at all times. A rapid integration of the company offers the opportunity to find and use further synergies.

In the end, the monetary measurement of these synergies is proof of whether the calculation works out and the takeover was a success. Such a measurement of synergies should be a priority for top management and should be supported by the Controlling can be measured. It is important that only real synergies are measured and that it is also honestly communicated that certain synergies prove to be unfeasible afterwards.

4. No focus on finance functions

A special focus should actually be on finance functions such as accounting, controlling and treasury in any integration. In most cases, it follows from regulatory reasons the need to prepare interim financial statements in a timely manner or to develop accounting guidelines for the Consolidated financial statements or provide the information for a purchase price allocation. Without this information, it can happen that financing lines break, tax potentials remain unused or the lack or incorrect capital market information can lead to Liability and financial risks in the millions. It is therefore advisable to use a Finance Task Force for this area, which consists of employees of the buyer, seller and, if necessary, external consultants.

5. Structures and processes are not standardized fast enough

Only if I adapt the structures and processes quickly enough will I get the transparency I need to manage the new company (and thus also the opportunity from No. 3). After all, the goal is to get back to "normal" work mode as quickly as possible.  However, one should not simply blindly "impose" one's own processes and structures, but can learn from the acquired company if necessary. Especially when it comes to complementary business areas.

A major focus should also be on the use of a uniform structure of the IT landscape lie. But you should ask yourself whether it really makes sense to use a Outdated ERP system to roll out to the acquired company if it may already be much more technologically advanced. Perhaps the PMI can also be used to question, streamline and adapt one's own processes and structures.

6. Integration without change management

A takeover means change. This "change" should be actively moderated and controlled. The change can lead to resistance that could jeopardize integration and the associated goals in its entirety. One Proper change management is therefore a very important building block and should have at least a project-related duration of 9-12 months.

The change manager does not necessarily have to be an external consultant or only one person. It can also be an internal change team that is authorized to make decisions. The most important thing is that these people have a plan for what should be implemented by when. Reduce resistance and, above all, explain why certain things are implemented, even if they are inconvenient and may not always make complete sense (as an example, the downgrade of IT systems, since the acquiring company works on older software systems).

7. No stringent project management

This is perhaps the most important point of all: project management! The expectations of a wide variety of companies, divisions and employees have to be brought together, usually in the (continuing) ongoing business operations of both companies and not infrequently with a lot of "politics".

The success or failure of a post-merger integration therefore stands and falls with the management of the post-merger integration project. The first step is certainly to recognize that I am dealing with a complex long-term project and to appoint a powerful project team accordingly. This needs the necessary backing and the necessary time. Under no circumstances should the integration project be neglected just because I have already made the next acquisition after 6 months.

A retrospective is necessary at the end of the project. You should learn and document from good and bad things. This is the only way to make the next acquisition even more successful and to exploit synergies from the project.

Result:

Post-merger integration is a complex long-term project and as such should have the necessary focus to achieve the goals pursued with the purchase . A special focus at each PMI is on employees & know-how, mark & customers, as well as administrative structures & processes. Especially in the area of employees, a focus should be placed on change management. You can also focus on these areas early in the process. True to the motto: "The first acquisition is the hardest", you can learn for future acquisitions and develop checklists and recurring questions that you can use for future post-merger integration.

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