Mergers and Acquisitions (M&As) are a critical lever for organisations looking to accelerate achievement of strategic goals in a shorter time frame, whether expanding into new markets, building new capabilities, solidifying their position in specific product markets or geographies, or acquiring key talents and capabilities. However, organisations have found it challenging to realise deal benefits in a timely manner. Historically, a large proportion of deals1 have failed to deliver on promised value on account of improper or delayed integration programs. Successful integrations typically achieve 90 percent of the results in the first 12 months2 . This highlights the importance of having a clear plan and then acting to the plan.
This article focuses on our experience in supporting successful integration programs for our clients, where we highlight key success factors that need to be considered and demonstrate how a clear action plan can help achieve results.
Factors Critical to Realising M&A Goals
Every integration project must solve for multiple moving pieces and consider interests of all stakeholders including customers, employees, vendors and investors. These factors include:
Integration Vision and Goals
Integrating businesses should have a clear integration vision and goals along with set timelines for a successful integration. A lack of clarity over vision and goals and conflicting priorities across the organisations can impact employee engagement and hinder integration momentum.
Sustained Focus on the Core Business
Integrations are complex and require the energy of all senior stakeholders. It is, therefore, important to ensure that the core business is not overlooked. Unplanned diversion of resources, including talent and capital, can impact the core business and negate the value realisation from integration activities.
People and Culture
Organisations often differ in the way they function and their culture. Addressing these differences proactively and aligning on a combined culture and ways of working is key to success.
Technology Alignment
Companies often use customized solutions that limit flexibility and scalability of systems during a merger. At these moments, it is important to look at operational gaps in IT applications, systems, contracts and infrastructure, and assess if these are ready to enable the seamless integration of the businesses.
Value Creation Targets
Companies oversimplify changes to business operations when estimating synergies. An overly optimistic base case with aggressive benefit realisation can cause unnecessary issues and derail business stability. It is important to prioritise the drivers of value and how investments are allocated to realise value from the transaction.
Decision-Making Framework
It is important to have a clear leadership structure for both organisations to streamline the decision-making process. Delays on key decisions due to the lack of formal and structured decision-making processes can negatively impact realisation of merger benefits.
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Footnotes
1 Harvard Business Review (HBR)
2 Institute for Mergers, Acquisitions, and Alliances (IMAA)
Originally published 21 August 2024
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.