Mergers and acquisitions are key initiatives of the highest priority for companies. In order to successfully achieve the set targets of an acquisition, serious effort needs to be put on the post-merger integration.
The KPMG Global Strategy Group Finland has conducted a study on Finnish companies’ post-merger integration performance. In total, 62 companies were interviewed regarding a chosen post-merger integration undertaken in the last 5 years.
Three challenges that companies need to address properly
Although companies generally rate themselves as having been moderately successful in integration projects, most seem to struggle with the same kinds of challenges:
– Align company culture. Obviously, cultural differences can arise in acquisitions where the target company is located abroad. But cultural differences should not be underestimated in domestic acquisitions either, since such differences can stem from factors such as different ownership (private, state or PE ownership), different maturities (old established vs newly started company) or different histories (e.g. competitor vs non-competitor). Aligning company culture is imperative in order to successfully merge two companies into one and achieve the targets of the deal.
– Communicate internally. Acquisitions usually cause uncertainties for employees within both the buyer and target companies. Therefore, open and frequent communication is vital in order to reduce any uncertainties and false rumors. When communicating, one should focus on how the message is delivered, and on ensuring that everyone gets the same message and that any chance of misunderstanding is minimized.
– Plan the integration process in advance. Integration planning should start as early as in the due diligence phase. Critical issues should be identified and addressed so that, when the deal is closed, integration can start right away with high momentum. Of course, not everything can be planned in advance, and therefore clear roles and responsibilities should be defined in order to handle upcoming issues efficiently. A well-prepared integration plan is critical in order to complete the integration process on schedule.
This is not to disparage the importance of addressing other issues in PMIs but success in handling these three particular challenges will play a vital role in ensuring a favorable outcome for your integration and in realizing the benefits of the acquisition. Therefore, if the needed resources or skills cannot be found in-house, companies should consider the use of external support.
More detailed analysis of how well Finnish companies have performed in their integration projects can be read in KPMG’s report.