merger integration planning
The integration planning is pivotal in determining the foundations for a successful integration. Its objectives are mainly related to laying out plans to integrate both businesses and preventing, or at least dealing with, issues as discussed above: identify the synergies which offer the biggest gains; sequence them; set a pace for the integration; make the process as smooth as possible to curb the natural increase in suppliers/customers churn rate and employees turnover whilst carrying the day-to-day operations of both businesses.
It is highly advisable to either have a representative from the negotiation team embedded in the integration team or have the integration team manager be part of the negotiations from the onset, so there is understanding about the reasons for choices made which influence the integration planning and execution. In any case, the Integration Management Team will drive the planning for the entire integration execution with inputs from the Pre-Merger Negotiation Team.
Depending on the integration level, a new company may need to be created altogether. In a merger of 2 companies, a new organization with a new structure and culture is the result of the merger. In such cases, planning for the type of company structure to adopt based on the business needs; the needed staffing with the proper compensation, skills and schedule needed, as well as defining the company culture and style to be adopted. Besides, detailed planning is needed for the integration of the various primary and supporting functions of both companies (Operations, Marketing & Sales, Manufacturing, IT, HR, R&D, Procurement, inbound and outbound logistics with suppliers and customers respectively). Such integration will drive most of the synergies identified in the company valuation.
Pre-Merger Planning. Concrete and practical methodologies can be woven into the entire merger process to achieve the results everyone wants. Starting in the pre-merger planning phase, visioning and scenario planning will give both decision-making teams a clearer picture of the synergies they can expect and what will be required to achieve them (beyond the mechanics). For example, when a large firm is thinking of acquiring a small and innovative start-up, it is often tempting for both parties to believe during negotiations that "nothing much is going to change – we don’t want to ruin what makes you unique." Yet this assertion hardly ever turns out to be true. By playing out various business and organizational scenarios, and envisioning how they can (or must) be handled, the merging companies can set more realistic expectations and prevent key contributors from feeling that they have been "lied to."
Pre-close planning: Establish synergy targets, teams, and performance metrics
The pre-close planning phase is a time for acquirers to translate their understanding of sources of value into explicit goals. It is the ideal time to set a high bar because there is a clear case for change, top management is paying attention, and stakeholders are committed.
Successful pre-close planning consists of three main factors:
- Set aggressive targets. The most successful integrations take an expansive view, establishing aggressive synergy targets through a bottom-up approach. Three topline areas deserve focus; protecting existing accounts and revenues, protecting the acquired company's revenue trajectory, and taking advantage of the joint capabilities to drive cross-selling and enhance go-to-market offerings.
- Establish teams. Make sure dedicated cross-functional teams are assigned to different synergy work streams and are ready to hit the ground running with a clear plan that details the resources and milestones.
- Align targets and KPIs. Among the most important elements for realizing synergies is aligning synergy targets and key performance indicators (KPI) for leadership teams and involved business units. It is important to recognize that cross-sell and development of new products/ solutions will not happen through a business as usual approach.