Unleashing value: Why companies need a clear post-merger integration strategy

Published: January 12, 2024

Updated: January 12, 2024

Article

According to the Harvard Business Review, companies spend more than $2 trillion on acquisitions every year. Yet study after study shows that somewhere between 70% and 90% of mergers and acquisitions (M&A) fail to create the value they intended, often due to issues related to integrating the two parties involved.

What can companies do to ensure they create the intended value after an M&A deal closes? In this article, we share how a clear and effective post-merger integration strategy, including proactive planning, risk mitigation, and strong governance, can help companies realize and protect deal value.

Why is a clear post-merger integration strategy critical to a successful acquisition?

A thorough and well-defined integration strategy is crucial to achieving the intended objectives and return on investment of an M&A transaction. The primary goals of pursuing M&A typically include generating growth and realizing synergies. However, this pursuit often involves inherent risks that not only make it difficult to create value through the transaction, but also lead to business disruptions that can deteriorate existing shareholder value. This is precisely why a clear integration strategy is critical.

Businesswoman presenting to colleagues with a graph on the tv screen in a modern boardroom.

The lack of a clear post-merger integration strategy can lead to various risks, including:

Insufficient integration planning can make it difficult to realize the intended synergies from an M&A transaction. This is often due to a lack of clarity on what must be done to achieve the synergies and who is accountable for each synergy initiative. As synergies are identified and evaluated, it is important to create a clear workplan that outlines tasks and initiatives, assigns task ownership and accountability, and prescribes timelines.

As two businesses come together, they each bring a unique way of working with differing structures, processes, and systems. It is critical for business leaders to create clarity on the degree of integration across functional and operational processes and define how differences will be managed. When employees are unclear about reporting lines and processes, it can lead to inefficiencies and tensions.

M&A transactions often create uncertainty for employees, which may evolve into disengagement. If key leaders within either of the two entities begin to disengage or leave the company, operational problems may arise as business operations are heavily dependent on these individuals. These leaders may also have personal relationships with clients that may be lost with attrition, hindering business continuity. Planning for retention of key personnel and proactively mitigating people risk is crucial to protecting and creating value in a M&A transaction.

Due to the complex nature of integrating two companies, businesses often do not have the capacity, capabilities, and expertise internally to facilitate integrations effectively. Leaders must plan proactively to ensure the appropriate resourcing and define a clear governance structure to promote integration success.

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Unleashing value: Why companies need a clear post-merger integration strategy

The lack of a clear post-merger integration strategy can lead to various risks, including:

Download the full article to learn the key elements of a post-merger integration strategy

No results found for {{ searchText }}

Unleashing value: Why companies need a clear post-merger integration strategy

The lack of a clear post-merger integration strategy can lead to various risks, including:

Synergy realization risk

Functional and operational risk

People risk

Capacity risk

Download the full article to learn the key elements of a post-merger integration strategy