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Three Considerations for Post-Close Merger Integration

The merger or acquisition has finally closed. Day One plans have been executed, information and plans that were once limited to a select “integration team” have been disseminated, and new organizational structures have been announced. In the midst of the excitement or fear (depending on your perspective), there is value – synergies or otherwise – to be realized and a set time frame in which to achieve it.

Many of the organization’s leaders and teams who are now responsible for delivering the value and making it work, were not involved in the pre-close planning efforts. Depending on the quality and depth of the pre-close planning efforts, options may be limited for course of action. And, all of this is on top of significant change and potential cultural clashes. So how can you ensure that the integration is successful.

1. Reconfirm Value Assumptions

Mergers and acquisitions are intended to be a source of value. However, it is well-documented that many of the deals that fail to realize their expected value, do so because of misaligned execution efforts. As new leaders are brought in who may not have been involved in developing the underlying assumptions to quantify value, there is an increased risk for misalignment between assumed sources of value and actual realization of value through execution efforts.

Start by reviewing and confirming any assumptions and plans received from the pre-close team, not with a view to change, but to understand the key value drivers. The goal of the M&A – either to lower costs or grow strategically – will dictate decisions and next steps. Once business expectations are clear, you can adjust accordingly and chart the path ahead.

2. Establish Execution Governance

The governance structure established to manage the pre-close integration planning efforts (i.e. Program Office or PMO) is typically reduced significantly or completely disbanded around the Day 100 milestone. While this overall structure is sufficient for planning efforts and may stay in place for macro-level synergy tracking, more focused functional or departmental execution governance is required to maintain the same rigor and decision-making discipline applied during pre-close. The focus simply shifts from planning to execution.

The specific design depends on the scope and nature of the initiatives and level of cross-functional coordination involved. Regardless of design, effective governance will:

  • Ensure functional structures and leadership are tightly integrated with overall governance structure – if one exists
  • Test long-term assumptions and course correct according to business needs
  • Take a portfolio management approach to ensure that the highest value integration topics get the resources and attention they need
  • Link each project or initiative to specific synergy targets, with priority on accelerating synergy capture
  • Include representation from Finance to ensure consistency with value/synergy tracking
  • Focus on monitoring and measuring results and timelines towards achieving the end-state
  • Give attention to cultural goals and adjust based on what is discovered

This approach provides discipline, prioritization, reporting, and monitoring of synergy realization. To be clear, this is not just good project management; it’s clearly linking integration activities to the value drivers with a holistic view to execution and business end-state.

3. Lead the Way

While culture should be assessed during deal formation and integration planning, it is during integration execution that cultural clashes manifest themselves on a broader scale. Change management as a discipline isn’t enough; true leadership must be present to support the teams who are carrying out plans. Employees need to see leadership is present, engaged, and taking an active role in hands-on work.

Leaders should demonstrate the desired cultural norms, values, and behaviors on a personal level. Take the time to understand any cultural differences and new opportunities, and resist the temptation to gravitate back to the past.

Integrating after a merger or acquisition can be stressful. From navigating new organizations to achieving the deliverables, executing a game plan is critical to success. Good leaders own the results; they do not let the results own them. If the integration is to be successful, stay focused on the value identified, create the mechanisms to deliver, track it, and lead the way.

To learn more, click here to download our latest perspective on how to drive value during your integration.

This article was co-authored by: 

deDavid Ehlen is a Principal and Global Structural Transformation Offering Lead at North Highland.  For over 12 years, David has helped his clients successfully manage complex transactions through the design and execution of Merger, Acquisition and Divestiture programs. He has led projects in all phases of the M&A lifecycle and has specific expertise in pro-forma operating strategy, functional planning, Transition Service Agreement management and Day One readiness planning.

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