Best Practices

Post-Merger Integration is Critical to the Value of a Deal

Jonathan Friedman
January 9, 2021
Post-Merger Integration is Critical to the Value of a Deal

Will your deal actually cross that finish line, or is there more integration that needs to be planned for? What does post-merger integration (PMI) really mean? Do you have the best M&A software to manage your post-merger integration to ensure success?

You may think your plans are laid out perfectly, but you should be ready to face some inevitable challenges post-close. M&A post-merger integration is essential, so familiarity with the process and best practices is essential.

Did you know that companies drop over $2 trillion on acquisitions every single year? Despite this, studies consistently put the failure rate of M&A between 70% and 90%!

Bad post-merger integration practices continue to be the #1 cause of PMI failure. To capture deal value, post-merger integration has to be successful. Learn how your company can maximize the potential for the combined entity.

Below is everything we will cover. Feel free to skip ahead.


What is post-merger integration?

Post-merger integration (PMI) is also referred to as M&A integration or post-acquisition integration. It's bringing together two or more companies, with the intention of synergy maximization. This is to make sure your deal reaches its predicted value.

We see mergers and acquisitions problems cause the failure of deals and result in getting less than you initially expected out of the deal. You know, it looks great on paper, but sometimes it just doesn't pan out that way. No one wants a semi-integrated company.

PMI planning should start right away -- at the start of the deal. All the while, you should be seeing that plans for best practices, M&A, and integral members of your team are organized before closing the deal.

Who is responsible for post-merger integration?

Without proper planning and execution of post-merger integration, the value of the deal may not be attained. You'll notice that human factors can present some of the most significant risks, despite the oversight's quality. Challenging issues may arise around the integration of your sales-force as well.

Top executives and stakeholders

Senior executives should gather all potential stakeholders involved before due diligence. The due diligence process involves internal stakeholders and bankers, consultants, lawyers, etc. Communicate together cooperatively about PMI details from the very start.

This due diligence phase should also involve keeping a close eye on the PMI period. Missing potential operational issues or risks during due diligence can significantly impact post-merger integration and, most importantly, lead to not capturing the deal's full value.

Additionally, many of the top executives involved in due diligence are also involved in some way with your Integration Management Office (IMO), if you decide to set one up.

Due diligence team members

The due diligence team comprises a select group of individuals from across your organization, such as finance, accounting, legal, technology, product, sales, operations, supply chain, and human resources. Due diligence team members should be involved in post-merger integration because they need to revise and retain information without having to redo their work. They should also avoid having to do redundant tasks. This keeps continuity, which, during this often chaotic time, is invaluable.

You'll see numerous benefits to maintaining continuity. When considering the team's data, you'll need to plan sufficient time to transfer it in full. Make the time to be thorough, so nothing is overlooked -- even the best data handoffs have some oversights and gaps.

Even if all the information does make it to the post-merger integration team, the members might not go over all the work due to time restraints. Making this time is vital so that you can avoid any gaps in knowledge.

You're going to want overlap between the integration and diligence teams. It will help keep that momentum and capture those much-needed synergies of the deal. This strategy is great because it results in finding the "low hanging fruit" of the deal within the first 120 days.

Human Resources & Communications

Even if you understand the importance of M&A integration planning, we see people getting lost in the shuffle, causing deals to miss the mark. You'll want to avoid losing employees and clients in the early days because this is when competitors might go after the target companies employees and clients.

Be ready to communicate and execute right from day one because the company's future depends on it, as does information about employees' benefits, their positions, and any targets. Human Resources and Communications will play an integral role in this "human" area of integration.

A change management expert

We advise that you bring on a change management expert or a senior leader responsible for the post-merger integration process. In an ideal world, this change management expert would lead the Integration Management Office.

Let's look at some of the reasons you should have a change management expert on your team:

Lastly, when choosing a leader, gather recommendations from the due diligence team. Both valuing and healthy practices of post-acquisition integration will happen top-down. This is important to consider when assembling both your plan and your team.

See the complete M&A due diligence checklist to manage any of your deals.

Post-merger integration checklist

Your post-merger integration checklist is used to keep teams on track and uses a step by step approach to ensure integration readiness. It's the backbone of your integration and should be used to avoid any surprises and ensure business continuity at critical stages, such as Day One. The post-merger integration checklist should include all personnel and departments.

Below are post-merger integration checklist considerations, which illustrate the issues you should address in your Day One post-merger integration checklist. The integration list is broken down by functional area.

Post-merger integration checklist

Human Resources (HR)

Finance, Tax, & Treasury

Legal

Technology

Sales & Marketing

Real Estate

Supply Chain

Shared Services

Your post-merger integration checklist should go into detail by asking yourself what, how, when, and by whom. It's critical that you always have one person accountable for each checklist item.

Furthermore, you should ensure you project manage your post-merger integration checklist and the entire merger or acquisition from pre-deal to post-deal. See Mergers and Acquisitions Project Management Leads to Value Creation for a sample project plan.

PMI areas

When planning for any merger or acquisition, it's essential that you focus on the following areas:

Types of post-merger integration

There are four standard types of post-merger integration: Absorption, Symbiosis, Preservation, and Holding. Which one are you using?

  1. Absorption - the target company is wholly absorbed, including all organizations, procedures, and processes
  2. Symbiosis - helps meet the goals of the merger in certain areas
  3. Preservation - target company remains self-governing, barring some financial information merging
  4. Holding - target company is owned by the acquiring company, but there's no integration

Knowing what type of PMI you're dealing with is one of the first steps to understanding the best integration techniques.

Post-merger integration process steps

When looking at the PMI integration process, it's clear that good planning should start at the beginning of the deal's lifecycle. Here, we've outlined this process for you so you can get the most out of the deal:

  1. Start off right. Plan and re-evaluate all goals regularly throughout the integration. Assemble your teams based on cross-functional goals so that everyone has a big-picture view. This eliminates common any related dependency issues.
  2. Hold your kick-off meeting at the actual commencement of the deal. Curate a list of people who'll be included in this phase. Clarify governance. Create the operating PMI framework for teamwork instruction, such as dependency management, info sharing, and meeting arrangement.
  3. Try using M&A software to help you keep a sharp eye during the diligence phase. This will help you plan for PMI before the close of the deal.
  4. To have a great outcome, pre-close synergies should be re-read and confirmed. Teams should be established along with their respective leaders.
  5. Hold your PMI kick-off meeting.
  6. Communication, as well as reporting channels, should be instituted, using monthly or weekly stand-ups.
  7. Teams should review and evaluate the PMI. This will realign teams and their respective goals in light of any new information.

To have a successful merger, and to avoid common problems, make sure your plan is thorough. Have an established plan before the close of the deal. Your teams should make a game plan and integration checklist for employees, set goals, have open communication and track progress.

Post-merger integration 100-day plan

The PMI 100-day-plan follows the approach, which is traditional to any integration. Teams should have the mind-set to follow a PMI playbook so that your integration is at a certain point after 100 days.

Nowadays, some teams follow an Agile strategy; instead, they no longer use the integration playbooks' traditional method.

How long should PMI take?

The time frame is up to you because every individual deal is different. Sometimes it takes years to complete, but you can bring this down. We see different rhythms to each.

Whatever type of deal is happening, it's essential that it begins very early (before the deal closes) and with diligence.

Post-merger integration best practices

There are many types of strategies. Here we'll cover some of the general post-merger integration best practices and the best steps to follow.

Post-merger integration best practices

1. Cut down on workload disagreements by having honest conversations and making a detailed budget.

Not all companies can have separate merger teams. However, smaller corporations can make sure that crucial players maintain a balanced workload. You need your post-acquisition tasks to get adequate attention, so Executive Management and Corporate Development need honest conversations and alignment with business unit and functional leaders.

For example, without agreement on synergy targets from the people responsible for delivery, you'll have resentment and conflict. Not to mention, it'll be unlikely that the company will meet synergy targets.

Think about and discuss what can realistically be accomplished. Can you hand off projects and tasks to other employees so other people can work on merging? Temporary hiring is something you could consider building into the budget if you need extra hands on deck.

Look realistically at the budget and take some time to think about how it can benefit the ultimate deal and PMI.

2. Use Agile-inspired sequencing and practices.

As you know, when a team lacks clear expectations, the result can be negative emotions and chaos. You don't want this to affect your PMI interactions. Set your expectations by creating a list of prioritized tasks that ultimately point to the critical objective.

Create clear expectations

Do your best to ask the right questions at the correct times. When you prioritize and sequence these questions with the target company, you'll see many benefits. Whatever hesitation all may have, it's worth working on and perfecting.

Keep focusing on the objective by using an effective sequencing style. Tasks should be related to the goal. This sequencing will not only help eliminate unnecessary work but will also reduce fatigue related to the deal.

Keep persisting with the daily contact, even if all may be tired of seeing each other daily. When you all stick with it, you'll b happy you did when you see the task lists get shorter and shorter.

Prioritize essential topics early on

Stemming from the point mentioned above, we can see that talking about critical topics early on is a direct result of meeting often with the target company. This allows for essential issues to make themselves noticed before it's too late to delegate the necessary time and money.

Don't let too many issues make the priority list, or it will become confusing to the company you're merging with. If you keep the list short, they'll be clear on what will happen and what to expect from the deal. Everyone will have a good chance of getting what they want.

Preserve company morale

As we factor in the human emotional factor, we can see that individuals react to shifts in their personal lives and work lives. Experts agree that when workers face significant changes both in their personal lives and at work, they move through similar stages.

These stages are often denial, anger, depression, and then acceptance, hope, and commitment. Models and terms can vary slightly, but both are relatively similar.

Avoid having your workers preoccupied with doubt and fear during mergers, resulting in their work suffering and company morale tanking. Consider using the Agile method to help avoid this, as we've seen, and this works very well in some post-merger integrations.

Take the Disney-Pixar acquisition, for example:

In 2006, Disney acquired $7.4 billion worth of shares in Pixar and turned it into a Disney subsidiary.

It's one of the most successful mergers of all time!

This particular M&A integration was a notable success because employees didn't feel l.ike their worlds were turned upside down in a flash. Instead, changes were implemented methodically and gradually using priority rankings. As a result, company morale stayed strong -- a strength vital to every PMI framework.

3. Use M&A tools, not spreadsheets and slide decks.

Find the right M&A tool for your team's needs. While there's no panacea out there, a great tool can speed up the M&A process and uncover valuable data. Keep everyone on the same page. Try not to rely on Microsoft Excel when project management and virtual data rooms (VDR) platforms are designed explicitly for M&A.

Give your merger a boost with a tool that has special functions that allow you to keep an eye on due diligence. Using a great tool, the buy-side and the banks will see fewer emails and an increase in collaboration.

Use an appropriate too for carrying data over to post-closing. This will inevitably help you and your teams avoid duplicate work, which can slow down the whole process and waste employees' time. In fact, you can tag items in the diligence process for the M&A integration itself.

4. Schedule 1-on-1 interviews with employees.

Change management is vital to focus on if you want to have a successful merger, as we touched on above. It's critical to your M&A integration plan.

You'll need a clear vision of effective communication about how the change will impact everyone. This, and the setting of realistic, actionable goals for adopting new processes and policies, will solidify employee cooperation for this kind of change.

If they don't see the purpose of the change or understand their contribution and impact on the process, they might not accept it -- and may even resist it. Keep the information flowing, so everyone is on the same page using the appropriate tools.

5. Six months after close, conduct a survey using a PMI questionnaire.

Present the questionnaire's findings to the executives. We see that stakeholders can be blind to the potential strong change-management and PMI practices. If you're a smaller company, you may be able to get away with less precise methods and ignoring the all-important leg work for the perfect change management.

The larger a deal is, the more important it is to pay attention to change management so you can avoid major PMI problems.

The main point is that you're going to need robust change management practices. We recommend that at about six months you should give your employees a climate survey. As we mentioned earlier, go ahead and analyze this data and then send it over to upper-level management in a report.

Once the leadership takes a look at what's working and what's not, you can all move forward with solutions.

6. Don't entirely rely on M&A post-merger integration playbooks.

It can seem like the perfect winning hand, but M&A post-merger integration playbooks are less popular these days. That's because no two deals are alike. There's no such thing as a PMI template because many moving parts, products, risks, different types of people, and varying issues that arise with each deal.

Even if you think you could use the same PMI playbook as you used for your last deal with a similar target company, you may have changed with time so that the deal will be different.

Using the same playbook could even be, dare we say, dangerous. It might hurt your big-picture vision and alignment due to the tunnel vision it could cause. Customer relations could be damaged by seeing and fixedly treating this deal.

To maximize the deal's value:


  1. Try to be flexible.
  2. Stop turning to playbooks as a cure-all.
  3. Consider using frameworks and other tools instead, and you'll thank yourself in the end.

Utilize the necessary frameworks and game plans that these playbooks offer without solely counting on them. The world of M&A is irregular and always fluctuating, so pick and choose what worked for certain aspects of similar deals from the past. Curate your own PMI plan with the help of technology.

Everyone involved must understand that the exact method will uncover itself as you formulate your PMI. You'll want to know the first steps and the people involved, but there is much to be discovered along the way.

M&A integrated solutions and TrueNxus as your post-merger integration software

TrueNxus understands M&A and post-merger integration. Our platform is built to enable your entire organization as a cross-functional team. It has everything that you need to capture the deal value. TrueNxus is the best work management platform for post-merger integration.

In any post-merger integration, you need help with:

Here's a look at some of TrueNxus's features:

1. Multiple views

M&A personalized views illustration

With any post-merger integration, people require different ways to visualize work across time. Not only that, but each stakeholder specializes in a specific functional area, and as such, each thinks about work differently. To ensure successful planning and execution in your merger or acquisition, you need post-merger integration software that provides personalized views that make sense to everyone involved in the deal. These views need to be in sync as well.

TrueNxus provides you with the following views:

List

M&A post-merger integration project plan list

A list is a table that allows you to manage your M&A post-merger integration project plan easily. You can organize your project work into groups such as workstreams or any logical way to categorize tasks.

Timeline

M&A post-merger integration timeline

With TrueNxus's Timeline, a Gantt-chart like view, you can visualize your project plans across time. It lets you understand how all of the work fits together. You can make updates to the project plans through an interactive interface.

3. Automated project status reports

M&A post-merger integration status report

We understand that each cross-functional team member is busy balancing multiple priorities, from your day-to-day responsibilities to multiple projects related to post-merger integration. Therefore, TrueNxus successfully executes monitoring and controlling post-merger integration by automatically analyzing the project's health in real-time, giving senior leadership and the team the insights they need to make decisions and move the ball forward.

4. My Work

View all of your work in one place

Another essential thing for everyone involved in post-merger integration is understanding what you're on the hook for delivering. With TrueNxus, you can view every task and every dependency vital to you, across multiple deals, in one location, ensuring success.

5. Dependencies

Dependencies

Additionally, we know that you don't want to let your colleagues down or be let down. You can ensure the successful delivery of M&A through collaboration and documenting task dependencies. By doing so, you can be accountable when others are reliant on you. You can understand dependent tasks, change implications, and adjust course as needed.

6. Automated notifications

Automated workflows - notifications

No matter your role in any merger or acquisition, you can also successfully execute work by leveraging software to notify when changes occur. With TrueNxus's 20+ out-of-the-box automated notifications, you will have the transparency you need to stay in-the-know.

7. Comments

Cross-functional team collaboration - comments

Additionally, the entire cross-functional team can ensure that post-merger integration plans are successful by collaborating directly in the app. With TrueNxus, you can communicate with colleagues, clients, consultants, and lawyers in one place.

8. Project charter

M&A integration charter illustration

Lastly, you can leverage OKR and create a project charter. You can ensure the successful execution of post-merger integration by documenting and aligning the project's objectives, benefits, and risks from the very beginning. TrueNxus is the only software that has a project charter directly in the app.

Conclusion

M&A post-merger integration can be extremely challenging, but as long as you celebrate the little victories along the way, you and your teams will be motivated to keep moving forward. Try to keep a positive attitude because it can serve as fuel for everyone else involved.

It would be best if you planned correctly from the very beginning by using the right tools and solutions. Teams should have access to all data and files before closing. They'll see issues early on and plan accordingly.

Remember to have fun and focus on the excellent synergy potential of the deal. Contact us today for essential solutions to all your M&A and PMI endeavors.