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As a professional with extensive experience in international mergers and acquisitions, I often hear that mergers and acquisitions rarely live up to the original intent behind the deal. Bain & Company recently published a report of their findings from research they conducted on M&A activity from 2000 to 2010, and they found that companies that pursued mergers and acquisitions as part of their growth strategy outpaced the growth of companies that did not.  Most interestingly, companies with more aggressive M&A strategies outperformed companies with moderate M&A activity.

Negative sentiment toward M&A is largely framed by the big failures - like the AOL and Time Warner merger, the largest merger in corporate history. (At the time of that merger, I was working with Vodafone, based in the U.K., on their hostile bid for Mannesmann in Germany, an acquisition also discussed as the largest merger on record. With AOL Time Warner's friendly announcement, the Vodafone Mannesmann merger which followed soon thereafter became the largest hostile bid on record.) The reasons for failed mergers are many, but in my experience, successful integration of the merged companies poses one of the greatest obstacles to success.

Companies generally do a very good job of defining the rationale for an M&A deal and conducting the required due diligence to ensure the right fit. Unfortunately, after investing substantial money, time, and energy into making the deal happen, management teams often fail to plan adequately for assimilating the two corporate cultures into a new cohesive unit. Constructive integration is doable, and management teams can plan ahead for a successful M&A outcome:

1. Assign a dedicated team focused exclusively on the tasks following the announcement.  As an extension of the due diligence team and within the dictates of regulatory guidelines related to the industry and the specific transaction, this integration team should be appointed as soon as management begins its due diligence so that the team has ample time to develop a comprehensive integration plan. You might think this timing is premature given that so many deals don't make it through the due-diligence process  But companies lose valuable time and momentum when they wait until the closing of the deal. One critical mistake in the integration process: management teams spend too much time trying to find the answers to very important questions after the deal is signed when they should be executing decisions made far in advance.


2. Define how the merged company will look in six months and in one year, and then develop the action plan that will get you there. Companies have very specific objectives with each merger or acquisition. Make sure the merged company stays true to those objectives, and consider the impact those objectives will have on every business unit, employee, and customer, and be aware of the changes that will have to occur to reach the six-month and one-year corporate vision.


3. Test the action plan to ensure that it matches the original rationale and objectives of the merger.  Make sure you consider all scenarios and outcomes. Integration teams can reduce the risk of failure when they identify the pitfalls before they happen.


4. Consider your audiences. Employees, customers, and business partners have firm loyalties, and a merged company must develop strategies to win these individuals and groups over to a new corporate culture and brand.


5. Develop effective messaging.Just because you understand the rationale of the merger doesn't mean everyone else does. Each audience has unique motivators that bring them to the brand. Some of these motivators are rational and some are emotional. Effective messaging will be consistent across all groups, but it will also be specific to address the motivators of each group.

Change is hard. Even though the benefits of the merger or acquisition are real, employees will have adjustments to make and new relationships to build. Customers may be asked to embrace a new, or at least modified, brand despite the fact that they love the old one. Business partners may question their relevance in the newly merged entity. These are just some of the audiences. Integration strategy plans for all these scenarios - and many more! It is about more than announcing the deal in an email. A successful integration plan brings people together as a team to appreciate the value of the newly merged or acquired company.

M&A can bring dynamic opportunities to a company: expanded markets, diverse customers, innovative technologies, and new products. Companies need not fear M&A activity as long as management understands the merger is not completed with the announcement or closing of the deal. The real work has just begun. With appropriate advance planning and timely implementation of the integration plan, companies can improve their competitive strength with sales growth, profit growth, and shareholder value.

 

Perry Hall was a Senior Account Supervisor at Lovell Communications. You can view more of Perry's blogs here.