[Whitepaper] Post-merger Integration (PMI): Pre-merger Considerations

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Framework Primer
Post-merger Integration (PMI):
Pre-merger Considerations
Presentation created by
Organization
& Culture
Takeover
Approach
Strategic
Objectives
1
23

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Contents
Overview
1. Strategic Objectives
2. Organization & Culture
3. Takeover Approach
Templates
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This framework discusses the 3 core pre-merger considerations that are
essential for the success of the Post-merger Integration (PMI) process
Presentation Overview
These core considerations assist in developing a systematic approach to undertaking
a PMI—it is devoid of any “gut decisions” and ensures realization of synergies and value.
The Post-merger Integration (PMI) process starts way before the actual M&A deal closure. During
this period, Leadership needs to clearly define the goals of integration, the potential risks, and
a layout for the execution of the actual integration process.
This framework provides a detailed synopsis of the 3 core considerations associated with M&A
transactions. The period prior to obtaining regulatory approvals—and while Due Diligence is
being done—is an excellent time for performing a thorough assessment of the 3 core pre-merger
considerations:
The slide deck also includes some slide templates for you to use in your own business
presentations.
1 Strategic Objectives
2 Organization & Culture
3 Takeover Approach

The course of a Merger & Acquisition transaction has to be set
at an early stage
A thorough deliberation on these core considerations sets the direction and pace
of the PMI process.
Pre-merger – 3 Core Considerations
Source: Post-merger Integration, Oliver Wyman, 2008
The Post-merger Integration (PMI) process starts way before the actual M&A deal closure. During this
period, the leadership needs to clearly define the goals of integration, the potential risks, and a layout for
the execution of the actual integration process.
The period prior to
getting regulatory
approvals—and
while due diligence
is being done—is
the right time to
perform a structured
evaluation of 3 core
considerations
associated with
such deals:
Organization
& Culture
Takeover
Approach
Strategic
Objectives
1
23
Understanding these core
considerations helps the
stakeholders ascertain the
unique challenges and
constraints related to M&A
transactions and make
informed decisions.

Contents
Overview
Templates

Organizations undertake M&As as a way to accelerate their growth rather
than growing organically
M&As provide opportunities for economy of scale, tax benefits, growth, competitiveness,
and increased market share and goodwill.
Strategic Objectives – Overview
The foremost core consideration associated with a Merger and Acquisition transaction is the strategic
objectives that the organizational leadership wants to achieve.
CONSIDERATION
Strategic
Objectives
1
M&A deals take place to fulfill one or more of these 5 strategic objectives:
The PMI approach
needs to be tailored
in accordance with
the strategic
objective of the deal.
1 Reinforcement of a segment
2 Extension in new geographies
3 Expansion of product range
4 Acquisition of new capabilities
5 Venturing into a new domain

3
2
1
4
Reinforcement
of a segment
Extension in new
geographies Expansion of
product range
Acquisition of new
capabilities
Venturing into
a new domain
The job attritions that result from mergers can spread antagonism and
resistance to change among people and unions alike
To avoid challenges associated with mergers, prompt decision-making, early delegation
of responsibilities, comprehensive, and quicker pace of integration is inevitable.
Strategic Objectives – Spectrum of Objectives
Organizations tend to focus on achieving the following strategic objectives from M&As:
In extremely
competitive markets,
organizations tend to
merge with rivals
having similar
backgrounds and
businesses to
produce cost
advantages (due to
scaling up of
operations) or to
improve their market
standing.
The motive behind
regional expansion
is to grow or expand
operations, generate
more revenue,
compete for new
sales, lucrative
investment
opportunities, and
reduce costs.
Companies introduce
additional items in the
same product
category—Line
Extension by adding
flavors, colors,
package sizes) or do
Brand Extension—by
introducing new
products to gain more
market share.
Some companies
plan an M&A as a
means to acquire
novel skills and
capabilities which are
otherwise too difficult,
costly, or time
consuming to gain.
The motive for doing
this is to secure
additional sales and
revenue. The structure
of an organization
venturing into a new
domain remains
unharmed but the focus
of integration shifts to
strengthening corporate
governance functions
and fostering an ideal
environment to take
the sales and earnings
potential to the next
level.
4
Strategic goals

Contents
Overview
Templates

M&A process often faces long delays between the offer, deal signing, and
closing—which may cause suspicion among people
The acquirer should anticipate and tackle these acquisition challenges and provide
appropriate solutions in the PMI package.
Organization & Culture – Overview
The senior management should be deeply aware of the significance of organizational and cultural
differences in the two organizations that often become barriers to M&A deals.
CONSIDERATION
Organization
& Culture
2
Small companies typically have an entrepreneurial outlook and culture where
there aren’t any formal structure and the owner controls (and relays) all the
information and decision making. Whereas, large corporations typically have
formal structures and well-defined procedures.
A takeover of a small firm by a large entity is bound to cause criticism and
disagreement. This should be mitigated during the PMI process by orienting the
people of the small firm with the new culture and giving them time to transition
effectively.

The organizational culture is comprised of 6 key elements
Understanding the organizational culture helps in making better management decisions.
Organization & Culture – 6 Dimensions
For M&A deals to be effective, leadership needs to carefully evaluate the behavioral elements
of the organizational culture and contemplate the overriding principles guiding a company.
This includes a critical analysis of the following 6 dimensions:
1
2
3
4
6
5
Organizational Structures
Employee Self-image
Reward System
Formalization of Processes
Management Style
Communication Culture
Organizational structures that influence the work of people.
Sense of purpose and ownership.
Recognition and reward systems that keep employees motivated.
Extent of Formalization of processes and procedures.
Cohesive leadership and decision making styles.
Top-down and bottoms-up communication.

Contents
Overview
Templates

A merger or acquisition can have a profound effect on a company’s
growth prospects and long-term outlook
A takeover can transform the acquiring company overnight, but there is a significant
degree of risk to be anticipated and mitigated.
Takeover Approach – Overview
Last, but certainly not least, we must consider the takeover approach. This has a significant impact the future
relationship and expectations between the 2 organizations.
CONSIDERATION
Takeover
Approach
3
The acquirers typically employ 4 different methodologies to manage buyouts:
The first methodology
involves a frank and
approachable outlook of
the acquiring company’s
management. The
leadership believes in
unrestricted exchange of
information right from the
outset of the deal signing
stage and finalize
integration decisions
promptly to ensure smooth
integration of the 2
combining firms.
The 2nd approach
encompasses a
collaborative assimilation
planning approach and
friendly outlook of the
acquiring company’s
management. However,
the leadership takes time
between deal signing and
closure to create
integration teams, and
commences development
of course of action and
detailed directives only
after deal closing.
In this approach, the
acquirer utilizes time
between the deal signing
and closing to thoroughly
plan all integration
activities. They have
detailed guidelines ready
before Day Zero. The
management outlook is
typically defensive without
any information sharing
with the people.
This approach is
categorized by swift
decision-making on deal
planning and Post-merger
Integration, lack of clear
information flow, and
unsympathetic treatment of
the acquired firm’s people.
The strong leadership of
the acquiring company
immediately embarks on
closing the acquisition
transaction and integration
of the two companies right
after deal signing.
Quick and
Unsympathetic
Disposal
Deferred DecisionsHiatusDirect Hit
1 2 3 4

Integrating the operations of two companies proves to be a much more
difficult task in practice than it seems theoretically
Takeovers have a 50% chance of success historically—but an appropriate approach can
make a huge difference.
Takeover Approach – Comparison
Organizations can select the most suitable takeover approach based on their mutual organizational structures, people,
management, processes, and culture.
Short shriftHome run Timeout Adjourned game
• Integration process
begins immediately.
• Open exchange of
information from the
start.
• Initial decisions can
be made before the
closing.
• Joint integration
planning.
• Initial team building.
• Preparation of
guidelines, decisions
only after the closing.
• One-sided integration
planning.
• Clear directions for
Day Zero and the
integration.
• Stabilization of
business is the top
priority.
• Integration process
must start at once.
• Dynamic and strong
leadership by the
acquiring company.
Open, friendly Defensive, destructive
Closing immediately
follows the signing.
Break between signing
and closing.
Closing immediately
follows the signing.
Types
Characteristics
Attitude
of management
Sequence
of transaction
1 2 3 4

Contents
Overview
Templates

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Takeover
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Strategic
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Strategic
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Flevy (www.flevy.com) is the marketplace
for premium documents. These
documents can range from Business
Frameworks to Financial Models to
PowerPoint Templates.
Flevy was founded under the principle that
companies waste a lot of time and money
recreating the same foundational business
documents. Our vision is for Flevy to
become a comprehensive knowledge base
of business documents. All organizations,
from startups to large enterprises, can use
Flevy— whether it's to jumpstart projects, to
find reference or comparison materials, or
just to learn.
Contact Us
Please contact us with any questions you may have
about our company.
• General Inquiries
support@flevy.com
• Media/PR
press@flevy.com
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[Whitepaper] Post-merger Integration (PMI): Pre-merger Considerations

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[Whitepaper] Post-merger Integration (PMI): Pre-merger Considerations