Post Merger Integration
22 March 2022 by Nils Koerber
In this article we deal with post-merger integration. Below is a brief look at the M&A market.
Im Jahr 2021 gab es rund 3.000 Übernahmen und Fusionen, bei denen ein deutsches Unternehmen beteiligt war. Dies stellt - die Übernahme von Ost-Betrieben im Jahr 1990 ausgenommen - einen neuen Rekord dar.
With a takeover, synergy effects created can lead to a better market positioning and continuous growth provide. But historically, only slightly more than half of all corporate acquisitions achieve a positive result. The ability to integrate the new systems into the existing company represents one of the most important factors in the M&A process is a major challenge. Therefore, post-merger integration is examined in more detail below.
Don’t have much time to read? Then read this summary:
- Der Prozess nach einer Übernahme - die Post Merger Phase - sollte nicht auf die organisational and technical sides remain limited.
- The PMI should rather include the different corporate cultures.
- The new culture has to be lived by all employees; only then will it be effective and lead to to the desired economic success.
- An experienced Company sale consulting can provide valuable support through their project experience.
- It can also have a positive impact in conflict situations as a mediator and moderator. Integration management have an impact on the merger of companies.
Definition: Post Merger Integration (PMI)
Post-merger integration describes the organisational merger of two or more companies after they have been merged into one legal entity. This process can be considered complete as soon as all companies are merged into one Uniform structure without redundant processes have been transferred. Colloquially, the term is often used to refer to everything that has to be done and solved after a company transaction within the framework of the new ownership structure.
Post-merger integration is a long process within M&A procedures, so it is advisable to set up a separate organisational unit for integration management. This is usually assigned to project management. The task of integration management is to support integration in the Company acquisition coordinate and create a holistic structure from the individual processes of all companies.
The Post Merger Integration Process
The post-merger integration process after a successful Company sale is typically divided into three phases, with the name and content differing slightly in different models. Essentially, there is a planning phase, a plan implementation phase and a change/transformation phase.
The Post Merger Integration Phases
In the Planning phase goals have to be defined and all issues identified that are to play a role in the ’new’ company or ownership structure. The new company or the new ownership structures should play a role in this. It is better to be thorough and detailed here. The list of important issues can always be reduced in the course of the process, but it is more complicated to include completely new concerns. Based on the issues to be addressed, the integration team is created.
Basically, a culture of discussion should be created that allows as many scenarios as possible to be thought through. A Project organisation plan helps to divide the individual topics into different work packages, prioritise them and assign them to teams. Interfaces between different processes can already be identified here, which can later lead to synergies or problems if they play a role for the same or opposing goals.
In the Project implementation phase the individual work packages are processed. As with all projects, success control is crucial for efficient implementation. Furthermore, the earlier problems and friction points are identified, the easier they can be managed.
In the Change/Transformation Phase competence is transferred from the integration team to the regular managers. While the integration team only creates the structures for change, change management is called for in the third phase. Here, the planned changes are to be transferred into day-to-day business. Already at the beginning of this phase, soft factors such as corporate culture, commitment to predefined processes and communication can be shaped. Because change management only works if people are involved.
Duration and effort are often underestimated
Many problems during and after a Company takeover can be traced back to an error: The Underestimating the effort and duration of integration. Planning in which every process in the company is scrutinised requires a team that is completely focused on this task. However, the time involved should not be underestimated. Therefore, planning should not be started too late.
However, the duration of integration also includes the time it takes for the change to become part of workers’ behaviour. Therefore, integration must not be declared over too quickly. Because if people feel that they are not fully integrated, the Corporate culture in the negative tilt. Therefore, the post-merger integration should be accompanied by a team in the long term.
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Post Merger Integration Consulting
Post-merger integration has an influence on many hard and soft factors. These can change for the better or for the worse. For many companies, post-merger integration is not routine, so it can make sense to bring experts on board. They can ensure that the first two steps, the planning and the implementation, are carried out in the best possible way. As structured and holistic as possible be carried out. Because in large projects, every mistake that has crept in at the beginning takes its revenge. An experienced integration team can eliminate many problems as they arise. Every transaction only makes sense if, taking into account the human factor, a refinancing of the investment can realistically be achieved.
Depending on requirements, the third phase can be M&A consulting be accompanied until all processes are fully integrated. An external and thus objective perspective is particularly advantageous for the employees. Since personal differences from the past have less influence on decisions, no one feels ’sidelined’.
Many bosses of small and medium-sized companies feel a responsibility for their employees and everything they have created. If an objectified integration takes place, the ’new’ employees feel that they have a sense of responsibility. Employees are much more valued and integrate faster into the new company.
The most important post-merger integration tasks
The most important tasks of a post-merger integration are always the same: First, the Hard business factors be integrated. This is the corporate organisation and structure. In order to accomplish this, the Task planning, dovetailing of organisational areas and filling management positions.
After that, it is a matter of soft factors into the foundation that has been created. The two core tasks here are process design and shaping the corporate culture. It is particularly important to bring together past and present and define a common future together with all those concerned.
Post Merger Integration Management
Post-merger integration management, as well as a well-planned post-merger integration project, has the task of connecting the acquirer and the company, but not overburdening the parties involved.
Proceed slowly and carefully. Get an overview and leave after a successful Company acquisition first take small steps. The development of a post-merger integration project plan can help. After a while, when you have gained confidence, you can put on the running shoes.
Strengthen or restructure the management organisation
Depending on the acquisition project (strategic or MBI = Management Buy In) tasks must be redefined between individual organisational units, competences and responsibilities must be clarified.
Securing jobs for top performers through post-merger integration
It is not uncommon for a takeover to result in high performers, managers and employees thinking of leaving. Successful post-merger integration management therefore binds this group of people to the company in good time. Proactively seek dialogue with top performers in key positions.
Define and leverage synergy potentials in the company
Integration management regularly has to answer the question of which processes or parts of processes can be taken over, redesigned or merged in order to make the company more efficient. Strategies also have to be adapted to meet the new structures and ideas of the owner.
Secure mood with the transferor
In many cases, the transferor is involved in the integration phase, either because he or she helps to make the financing possible (e.g. by means of a Seller loan) or he himself continues to manage the company operationally for some time. A respectful and trusting relationship with the transferor is necessary to make the transition as smooth and efficient as possible.
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Post Merger Integration Success Factors
Post Merger Integration Project Plan
An important post-merger integration success factor is the Post Merger Integration Project Plan. This brings a structure to the project and can help to identify problems and eliminate them. The importance of prioritisation should not be underestimated, because any Fully integrated organisational unit generates information that can be used for the further process.
An example of this is accounting. In internal accounting, information is collected for the Corporate governance generated. Key figures can be used to identify successful and problematic business areas, processes and products. A poorly integrated accounting system cannot do this, even though integration offers the possibility of addressing precisely the problem cases.
2. the human factor
A success factor in PMI that should not be underestimated is the Man. People orient themselves through their needs in connection with their work. Because inner satisfaction, self-efficacy, status and income depend on your job. Changes at work worry many workers. But for the success of a company, a Positive working atmosphere and a healthy work culture essential. Therefore, it is important to integrate the employees into the process. While stakeholder value should be in the foreground during acquisition, shareholder value must be taken into account during integration. Therefore, post-merger integration management should work closely with stakeholder management.
3. openness to change and agile transformations
Many companies are in favour of a Change in corporate culture not ready. Therefore, they cling to old structures that are either outdated or soon will be. For there are changes on the horizon. These include the Digitalisation, the home office and consideration of environmental influences in the company. These aspects have been discussed for years, but have only come into focus as a result of the Corona pandemic.
There are no taboos when it comes to post-merger integration. Necessary transformations must be anticipated and integrated with the affected employees. Even if areas are completely changed in the process, this can significantly increase future competitiveness. An agile approach can be the key here. The benefits and purpose must be communicated transparently both internally and externally.
4. plan the planning phase already during due diligence
Before companies are merged or a company is realigned with the successor, a Due Diligence takes place. This serves to examine the risks of the merger or acquisition. This audit is the optimal timeto determine the most relevant areas for integration. In this way, the time until Closing of a transaction can be used with the integration planning. This also allows the integration to be initialised as quickly as possible and no time is lost. Many companies underestimate the duration of integration. The time of full functionality is thus significantly delayed.
Conclusion
Post-merger integration decides whether an investment worth millions pays off or fails. On this occasion, the company can be completely redesigned. However, it is important that the Core competencies and the people should not be forgotten. Thorough project planning is essential for success. With professional advice, a company can benefit from the experience of past integrations. In this way, the transformation can be approached in a more structured and holistic way.
About the author
Nils Koerber
Born in 1964, trained and studied as a businessman and business economist, certified coach and trainer for succession processes in family businesses, trained mediator (business mediation) and conflict moderator. Co-founder and owner of KERN - Unternehmensnachfolge since 2004. Successful. Practitioner with many years of experience in all aspects of corporate succession in family businesses. Specialised in M&A processes in medium-sized companies. Learn more >