1) While mergers and acquisitions are growing, many fail due to companies underestimating the challenges of integration. Management often focuses on the transaction rather than integration, and cultural differences are commonly overlooked. 2) Effective integration requires a holistic strategy that addresses financial, strategic, cultural, and organizational fit. It is important to analyze culture during due diligence to identify potential issues. 3) Having a clear post-merger vision and objectives helps reduce integration time and ensures synergies are realized. Technology integration also requires planning to consolidate systems and ensure customer needs are met.

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or most organisations,the past eight
years have centred around cash-flow
and survival.Now,the tide is slowly
beginning to turn and organisations
in certain sectors are re-focusing on growth,
expansion and succession planning.Mergers
and acquisitions (M&As) are therefore back
on the boardroom agenda.
While M&A activity is growing steadily,
failure is surprisingly common. As a large
number of organisations will complete just
one or two acquisitions in their lifetime,
management may have limited or no
experience of the M&A process.Management
teams often believe that they can plan and
manage the M&A process themselves but due
to a lack of experience and resources,they can
make poor integration decisions as a result.
This causes a lot of relationships to disintegrate
and acquisitions to fail. Organisations also
often assume that, once the acquisition is
complete, the benefits will automatically
follow.This is not the case as just one third of
all M&A integration projects achieve their
objectives. Other typical reasons for failure
include: losing key customers and talent;
overestimating potential synergies;
underestimating cultural differences;allocating
insufficient resources and budget to the
integration process; knowledge gaps, which
can be driven by confidentiality issues; and
failure to properly analyse market and
competition reaction to the M&A.
While carrying out a merger or
acquisition, the running of the existing
organisation can take a back seat.Management
teams often choose to focus their time and
energy on completing the transaction and
dealing with the process of integration
planning, implementation and subsequent
integration problems.These issues can be
stressful, complex and time-consuming for
already busy executives,hence the high failure
rates.Study after study has shown that much
time and money is spent analysing and
negotiating with targets in the pre-acquisition
stage.The most important factor in successful
M&A activity,however,is effective integration
into the parent organisation – something that
is often neglected until it’s too late.
key suCCess faCtors
Research has shown that 80 per cent of
organisations with a properly planned,aligned
and executed integration strategy ultimately
achieve integration success.A clear pre- and
post-M&A strategy will deliver significantly
higher long-term value,while a well-executed
integration process can generate a competitive
advantage.To achieve a competitive advantage,
organisations must develop a holistic
structured approach to integration planning
that provides clear goals and objectives for
candidate selection, negotiation and
integration. While a holistic approach is
required, the pre-acquisition analysis stage
typically focuses on the financial and strategic
fit of the target organisation with little or no
attention paid to the two issues that cause the
better
together?
Now mergers and acquisitions are back on the corporate agenda,
executive teams need to pay close attention to integration management
if a deal’s full value is to be captured,writes Dr Nicholas Ingle.
F
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21
diligence process,prioritise the cultural issues
that could put synergy realisation at risk.
assessmeNttools
Organisations can choose from a broad
spectrum of cultural assessment tools and
techniques,which range from very simplistic
checks to detailed analysis techniques. An
example of a simple early-stage check is to ask
your executive team and trusted advisors to
use three adjectives to describe your
organisation and potential target organisation’s
culture.Using this technique,you can identify
potential opportunities and problems quickly.
As the deal progresses, determining the
degree of post-acquisition integration
required depends on two primary cultural
variables – the level of integration required
(i.e. standalone, partial, or full) and the
organisational culture types being merged.The
following simple organisational culture
assessment will help identify the culture types
being merged at an early stage:
Power culture: typically autocratic and
power-centred, with an emphasis on
individual decision-making.This organisation
is suppressive towards challenge.
role culture: typically bureaucratic and
hierarchical with an emphasis on formal
regulations and rules.This organisation values
efficiency and standardised customer service.
task culture: focuses on team working and
commitment.There is a degree of flexibility
“80 pER cENt
of oRgANIsAtIoNs
wIth A pRopERLy
pLANNED,ALIgNED AND
ExEcutED INtEgRAtIoN
stRAtEgy uLtImAtELy
AchIEVE INtEgRAtIoN
succEss.
”
majority of integration problems – cultural
and organisational fit.
That said,integration is a balancing act that
occurs over the lifecycle of the M&A process.
While parent organisations will want to
preserve what is unique and successful about
the acquired firm, they will also wish to
leverage their own capabilities.To do both
successfully, organisations must incorporate
financial,strategic,cultural and organisational
integration tasks. Aligning financial and
strategic elements throughout the M&A
process is critical to success but in a
professional practice merger, real value will
only be realised if cultural and organisational
integration is included.Yet, poor cultural
integration is the number one reason why
M&As fail. Myriad reasons for such failures
have been identified: management may not
get the opportunity to analyse culture in the
pre-acquisition stage;they may not have the
necessary expertise in-house to complete the
integration process successfully; and they
simply might not want to analyse the culture.
Cultural issues don’t go away,however,and
in reality cultural clashes are common in the
M&A process as organisations often do things
in fundamentally different ways.This creates
frustration and anxiety among staff while trust,
which is critical to success,slowly erodes.The
result is demoralisation followed by a decrease
in productivity, which in turn prevents the
realisation of synergies. In the worst case
scenario,organisations could face an exodus
of key talent from the organisation and
dissatisfaction among – or loss of – key
customers. At this point, the value of the
merger or acquisition is at risk.
Cultural integration clearly isn’t something
that can wait until after the deal is done. It
needs to be at the fore of executives’thoughts
and the acquiring organisation needs to look
at every aspect of its operation,assess its own
culture and determine the vision for the
combined organisation. In doing so, the
organisation will be in a position to better
identify suitable candidates and, in the due
and employee autonomy,and this organisation
fosters a creative environment.
Person culture: the emphasis is on the
individual, and personal development is
encouraged.
By categorising the organisations involved
using this culture assessment matrix,
management teams will be able to identify
potential cultural clashes and opportunities at
a glance.This information can then be used to
set the integration agenda in accordance with
their vision for the integration but be warned,
detailed cultural analysis is critical to success.
thiNk aboutteChNology
Having a strategic IT capability can lead to a
competitive advantage and a critical post-
merger objective may be the smooth
transition to a chosen IT platform.IT might
also play a critical role in a broader range of
deliverables including the successful
conclusion of the merger or acquisition;the
delivery of value;the realisation of synergies;
and responding to changes in customers’
needs.The ongoing integration challenge for
IT is to identify how much can be saved by
consolidating systems,data and staff.
If you are a professional firm engaged in a
single merger or acquisition, pick the best
system from both firms, identify any desired
additional functionality and note it for
implementation at a later date.
key obJeCtives
The key to M&A success is to adopt a holistic
approach to integration. By creating a clear
vision and strategy supported by a set of
aligned strategic, financial, cultural and
organisational objectives, organisations will
reduce integration delivery time, realise
synergies,prevent value leakage and create a
competitive advantage.
Dr Nicholas Ingle is CEO at
SMARTT Partners,an M&A
integration management consultancy.
Dr Nicholas Ingle is CEO at
SMARTT Partners,an M&A
integration management consultancy.
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