Providing structure to the post-merger integrations process

Post-merger integrations are notorious for their complexity, with many integrations failing to meet the synergies and desired outcomes expected upfront. Providing structure is one of the key success factors for getting integrations right – Angelo Centrone and Riccardo Laurenza from Eurogroup Consulting in Italy explain how this can be achieved.

A post-merger integration is the process of unifying two entities and their assets, people, tasks, and resources in a manner that creates the most value for the future of the enterprise by realizing efficiencies and synergies. A post-merger integration can follow from an acquisition (or divestment), a merger, a joint venture, or a carve-out.

Like any major transformation, all post-merger integrations have roadblocks to overcome ranging from organizational integration, to processes, people, systems, and culture.

Hundreds of researches have over the years looked into the keys to successful integrations, uncovering success factors including leadership commitment, execution speed, project governance, the involvement of finance teams, focus on people change, and more. Arguably the most pronounced factor is providing structure to the transition, and doing so in a ‘project’ environment separate of the day to day operations.

To provide this structure, in our post-merger integration work we follow a three-phased approach:

Preparation

The first phase spans the preparation period prior to go-live. In this phase, the focus is on defining the post-merger integration strategy (example: big bang versus step-by-step approach), the new organizational structure, and cascading the transaction’s key business case drivers (synergies and cost savings) into more concrete targets and plans.

During this period, the communication towards external and internal stakeholders starts and the roadmap is delivered for the next phase, the integration phase before go-live.

Integration

The ideal approach to the integration phase depends on how the integration is planned. In the case of a big bang approach, which sees the full company transition at integration day, all pre go-live activities need to be completed before the single milestone day.

In some cases, leaders can opt for an approach of different go-live waves, by for instance region, or function, or business unit. In these cases, post-merger integration is more about achieving go-live milestones, while ensuring the right balance between subsequent go-lives and the day-to-day operations.

Stabilize

The period post go-live is the business as usual phase, or stabilize phase. The focus here is on synergies realization.

Synergies can span the business, from commercial uplift delivered by better opportunities and cross-selling by sales & marketing teams, to efficiency gains realized through larger procurement deals,  more efficient use of resources and real estate, or employee downsizing in overlapping areas.

The stabilize phase also focuses on smoothly transitioning to new, shared way of workings. While this cuts across all aspects of doing business, areas that require particular attention are finance operations, IT architecture and applications, logistics and supply chain, sales & marketing, and people & culture.

About the authors
Angelo Centrone is managing partner of Eurogroup Consulting in Italy, where Riccardo Laurenza is a senior manager. Both have been involved in several merger integration projects, mainly within the pharma environment.