5 building blocks of successful business integration after an M&A
Did you know that in 2021, over 3,000 German companies were involved in a takeover or merger, merger & acquisition or M&A in 2021 (unternehmeredition.de/Oaklins)? Even though the number dropped again in 2022, it’s still way above the average of the past decade. The impact of these deals is becoming more widespread, affecting more and more of us. But here’s the catch: between 40% and 70% of these transactions end up failing, according to a study conducted by Lars Schweizer, a distinguished professor of business administration at Goethe University in Frankfurt (FAZ). Failure rates are alarmingly high.
Now, let’s delve into the reasons behind these failures. A whopping 80% of these unsuccessful mergers and acquisitions (haufe.de) can be attributed to a lack of or inadequate Post Merger Integration (PMI). That’s where I come in. Of course, there are as well very successful M&As, and I took part in a few of these. But the majority of M&As never reach the originally set objectives. With my experience participating in six integration projects after corporate takeovers, I’ve witnessed firsthand the critical importance of successful post-merger integration.
But what exactly causes so many of these integrations to crumble, and how can we prevent our own from suffering the same fate?
Through my own experiences and extensive research, I’ve identified five key building blocks for achieving successful post-merger integration. In the following analogy, I’ll use the process of building a house to give you a sneak peek into these essential building blocks.
1. Clear integration strategy:
Just like a strong foundation is crucial for any construction project, a well-defined integration strategy sets the groundwork for a successful takeover. Before diving headfirst into the acquisition, it’s vital to identify your goals, which are always very individual.
Are you seeking …
- New technology, innovation or know-how?
- Access to new customers, untapped markets or different channels to your customers?
- The benefits of synergy and scaling?
- Acquisition of already trained talent?
Perhaps it’s all of the above, nearly for sure it will be a combination of the above. Each acquisition is unique, and your integration strategy should reflect your specific goals. A clear roadmap and priorities will guide your integration process, helping you stay focused, mitigate risks, and create a compelling vision for the future.
2. Clear leadership and communication:
Once the foundation is set, it’s time to build the supporting structures. Clear leadership and communication form the bedrock of any successful integration. Remember, a company takeover always means change, and change can unsettle even the most stable environments. To navigate this transition effectively, you need a strong leadership team with experienced managers who can provide guidance and support to employees. Clearly defined roles and responsibilities minimize uncertainty and boost efficiency. Additionally, open and transparent communication is key. By involving employees, customers, and stakeholders, addressing their concerns, and keeping them informed throughout the process, you can build trust, reduce anxiety, and foster a sense of unity.
3. Cultural integration:
Now, let’s add some walls to our metaphorical house. Just as walls define the character of physical space, cultural integration plays a vital role in bringing together disparate corporate cultures. Often overlooked, this aspect is crucial for success. Proactively addressing cultural differences and fostering a shared corporate culture is essential. Open communication, shared values, and a positive working atmosphere are fundamental in bridging the gap between different cultures. Successful cultural integration is like renovating a house, tearing down old walls, adding new ones, and creating something better and stronger. Merging cultures should never be about imposing one over the other; it’s about understanding, respecting, and fostering collaboration. By breaking down cultural barriers, you’ll strengthen the sense of belonging in the new company.
4. Comprehensive and detailed planning and execution:
Just like building a house, inadequate planning in integration can lead to costly delays. Thorough planning is the backbone of a successful merger or acquisition. It ensures efficiency across all critical areas, such as finance, human resources, IT systems, sales, and marketing. An integration plan with clear milestones, timelines, and key performance indicators acts as your guiding compass. It enables you to measure progress and success, while defined responsibilities, allocated resources, and adequate support ensure smooth execution. Implementing a clear accountability structure and utilizing agile project management methodologies will keep your integration journey on track and lead to a successful outcome.
5. Focus on employee engagement and retention:
For our house to shine, it needs light and seamless communication. Similarly, employee engagement and retention are vital for integration success. Employees are the lifeblood of any organization, and their support and motivation are critical during this transitional period. Just as a house needs electrical and communication systems, you must ensure that employees feel comfortable in their new environment and have open channels of communication. Early involvement, active listening, and addressing their concerns are essential steps. Targeted communication, training, and support programs will boost employee engagement and cultivate positive company culture.
Conclusion:
In conclusion, successful post-merger integration requires a clear strategy and a structured approach. The five building blocks outlined above provide the framework for success. By incorporating these elements into your integration process, you’ll increase your chances of achieving the desired synergies, ensuring a smooth transition, and ultimately realizing the goals you initially set.
Now, I’m curious to hear about your experiences with corporate acquisitions.
What worked well in your company’s integration?
Did I overlook an important building block?
In the upcoming weeks, I’ll dedicate a separate blog post to each building block, so stay tuned! Follow me or ANANJOLE to ensure you never miss an episode on this intriguing topic.
About the author:
Andreas H. Ogrzewalla
Co-Founder ANANJOLE
Experienced People and Commercial Leader with more than 20 years managing commercial teams, country offices and small Business Units in Germany, Spain and Austria.
Druing his career, he participated actively in the post merger integration of 6 M&As
