The Missed Phase of Post-Merger Integration

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Despite well documented processes to execute a Post-Merger Integration (PMI), there is still serial under-performance against expectations of this transformation strategy. Some estimates are as high as 70% of mergers and acquisitions fail to meet their original business case. Various studies suggest that the strategic logic, financial assumptions, cultural fit, implementation execution etc. all play a role in that under-performance.

However, even if all these things are done well, there is still a critical phase not addressed in many  PMIs.

You need to have experienced a PMI first hand to understand how challenging an environment it really is:

  • The intense pressure to achieve the estimated synergy targets embedded in the deal whether they are reasonable or not.
  • The fast paced nature of analysis and decision making inherently means many suboptimal decisions are made.
  • The necessary breaking of many well-established operational processes and relationships and the establishment of new ones.
  • The dealing with cultural challenges of fierce competitors now expected to collaborate effectively.
  • The need to remove uncertainty quickly to reduce the anxiety within the combined organisation and move to a more normal operational footing.

By necessity it is an imperfect process and numerous things are left to be done. Unfortunately, many organisations declare victory once the financial synergies are achieved, move to a “Business as Usual (BaU)” footing and fail to reach optimum performance. However, BaU conditions are rarely conducive to completing the remaining activity.

It is important to recognise and agree there is unfinished business, agree the priorities of what to achieve next and how to achieve it, an ongoing sense of urgency, an effective process to execute and most importantly broad empowerment to act. This should be identified as the business optimisation or business improvement phase of the integration.

The tragedy is that by the time the Executive Committee recognise there is a problem the PMI infrastructure has been dismantled and implementation momentum is lost.

To improve your PMI performance consider the following:

  1. Define PMI success internally as “reaching optimal operating conditions.” It is important to go beyond the achievement of synergy targets.
  2. Design into the PMI process an optimisation/ operational improvement phase so the whole organisation understands this to be the end goal and will work towards it. Allow the design and execution of the early phases to be refined with this objective in mind.
  3. Celebrate success at each phase of the PMI to mark the milestone, allow closure and refresh for the next phase. This is important to manage change fatigue.
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The Missed Phase of Post-Merger Integration

2 thoughts on “The Missed Phase of Post-Merger Integration

  1. Tsatbell says:

    From my experience with Post-Merger Integrations the executive committee want to declare victory as early as possible. Doing so reduces scrutiny from the Board, Regulators and other interested parties.This can be a positive thing, it feels like things are going back to normal. In reality setting an additional internal goal to optimise performance over time helps set the organisation up for the phase after the initial integration activity. You can have your cake (by declaring victory to the market at the attainment of the synergies) and eat it ( by setting an additional operational goal)

    Like

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