Reading for Lecture 12.

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Post-merger integration
i) After-Merger First Stage;

ii) Developing the Post-merger plan;

iii) Role of the Integration Managers;

iv) Why sometime Mergers dont work.

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After-merger first stage

1. Nominate an Integration Team & Managers;
2. Nominate/appoint the new Board of Directors; 3. Test synergies;

4. Conducting the Financial review;

5. Plan and define the new corporate governance; 6. Review the business plan/post acquisition plan; 7. Analyze which functions will be integrated and which will remain separate; 8. Develop a new organization structure.

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Developing the post-acquisition plan

The final stage in any acquisition is the implementation of the post-acquisition plan to integrate the acquired company into the acquirer. The primary elements of this plan should revolve around what changes are necessary, how to implement those changes, and how to manage the fear of change. In particular the fear of change will need to address the following components of the business: Customers fear of product or service changes; Suppliers fears of detrimental changes in the Targets financial strength; Employees fear for major layoffs; Managers fears of staff redundancy.
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Developing the post-merger plan (contd)

Decisions regarding qualitative aspects of the business must be reached on such questions: How does the proposed level of autonomy fit with the buyers corporate style and culture;
What steps will be taken to foster the level of cooperation and/or competition desired between the employees of the acquirer and target; What changes in accounting and operational procedures should be made to reach synergies.

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Role of the integration managers

Inject Speed Ramp-up planning efforts; Accelerate implementation; Push for decisions & actions; Monitor progress against goals, and pace the integration efforts to meet deadlines. Create Structure Provide Flexible integration frameworks; Mobilize joint teams; Create key events & timelines; Facilitate team & executive reviews. Make Social Connections Act as traveling ambassador between locations & business; Serve as a lightning rod for hot issues; Interpret the customs, language, and cultures of both companies. Engineer Success Help to identify critical business synergies; Launch 100-day projects to achieve short term bottom-line results; Orchestrate transfers of best practices between companies.

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Why sometimes mergers dont work

Why sometimes M&A are not producing the expected synergies? 1)Sometime acquisitions fail simply because they set too high performance targets. 2)In other cases acquisitions turn sour because the benefits they bring are easily replicated by competitors. 3)Acquisitions although a quick route to growth require full payment up front. At the contrary investments for internal/organic growth in R&D, capacity expansion, or marketing campaign can be made in stage over time. Consequently the need for financial returns in acquisition requires returns from the start on the full capital employed. 4)An acquisition price too often is driven by the pricing of other comparables acquisitions rather than by a rigorous assessment of where, when, and how the management can drive real performance gain.
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