Five post-merger integration tips for better synergy realisation

26 May 2021 5 min. read
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Successfully realising the benefits of any acquisition of merger is notorious for its challenges. Ludvig Daae and Maarten Mees ten Oever from Capgemini Invent share five tips for how companies can increase the likelihood of delivering the projected synergies in the post-merger integration phase. 

Base synergies on the strategy

Synergy in essence means that the value of the two companies combined will be greater than the sum of their parts. Synergies are most often the reason that mergers and acquisitions take place, but realising them is easier said than done. To increase the probability that synergies will ultimately be realised, it is important that they are clear from the start.

By setting clear strategic decisions and expected outcomes upon which the merger is based, executives ensure that the synergies will naturally follow for both parties, mainly because the guidance regarding where the integration projects should go in the future is established. Linking the synergies to KPIs can help track whether progress is still in line with strategic goals. 

Ludvig Daae and Maarten Mees ten Oever - Capgemini Invent

Don’t forget IT due diligence

In the pre-closing phase, deal teams conduct all kinds of due diligence studies – to assess the healthiness and fit of business areas. With technology now an integral part of any strategy, it is key to delve into information systems and information management, so don’t forget the IT due diligence. 

Without proper IT due diligence pre- or at least post-merger, there is a huge risk that financial, compliance, and legal issues will pop up. This can mitigate any synergy benefits or even undo an entire post-merger integration. Meanwhile, costs for IT restructuring can make the business case less attractive.

Also, companies engaging in cross-Atlantic mergers should consider the specific laws and regulations that define how information management should be performed. For US-based companies this is the Sarbanes-Oxley Act (SOX), while for companies working with European customers it is the General Data Protection Regulation (GDPR).

SOX requires that publicly held companies have business continuity plans in place. This means their European subcompanies should have them in place as well. The GDPR, on the other hand, mandates that companies know where their customer data resides. 

Further reading: A checklist for IT due diligence and integration

Have a digital perspective on integrations

In current market conditions, accelerating digital transformation is key for improving profitability and growth. That’s why you should have a digital perspective on the integration. When two companies merge, their infrastructures, processes, etc. are not yet aligned. To ensure that these will successfully integrate to the required level (depending on strategic decisions), think about the applications, agility, scalability, and how both parties can exchange digital capabilities. 

Validate whether the application landscape aligns with digital ambitions. What resource capabilities support the ambitions and which capabilities are to be added? In other words, use IT modernisation to ensure that business transformation takes place during the integration.

For example, when agility and scalability are preferred, focus on consolidating multiple ERP systems into one ERP system and align the business processes of both companies. This also ensures scalability and ease-of-transition for future mergers. Don’t take any shortcuts while running these projects – such as moving workloads without proper analysis – due to business continuity risk.

IT modernisation is difficult work; it also is an ongoing project. You’re never fully modernised because people, processes, and technology are always changing. But a post-merger integration provides a great opportunity to use the momentum to enhance alignment.

Embed change management

Culture eats strategy for breakfast. Each project or workstream lead should understand and feel that they are responsible for successful change management. There shouldn’t be a separate change management stream that can take accountability away from other streams. 

To successfully integrate two companies, their people and cultures, effective communication and giving employees ownership in projects is key. Using the leadership skills of an executive can have a positive effect on change; for example, have the CIO of the acquiring company provide the introduction and the strategic reasoning before a principles workshop. This can help both sides understand each other and the overarching vision.

Ensuring that employees can interact and get to know each other through workshops on specific topics is key in bridging fears and motivations. Highlighting cultural differences upfront can take away a lot of misunderstanding.

Define clear principles and follow up

More often than not, IT managers try to use integrations to finance state-of-the-art and over-priced solutions that do not provide value to the transformation. Clear principles help to avoid such situations. Principles are fundamental statements that function as guidelines for integrations. They are key in bringing different parties together and should be prepared via executives’ alignment meetings. 

Always be very rigorous in setting correct and unambiguous principles, otherwise alignment and behaviour could deteriorate along the way. To ensure principles are applied, make sure that they are embedded in the governance. This can be done in a couple of ways – for example, by deciding about these at board level and continuously carrying them out in workshops. When performing further integration projects, the principles should be taken as standards by the steering committee. 

When there are many integration projects, put a quality board in place to check if principles are applied when decisions are made or agree to only discharge a project team when principles have been successfully validated. By doing this you’ll also benefit from increased financial control, considering that a lot of capital is made available for mergers and acquisitions.