Organizational and managerial experience is crucial to ensure a successful merger.
By Michael Megarit
A Successful Merger Requires Integration
Ensuring a successful merger is a process that requires preparation and proper execution.
Recent in-depth research by Singh & Zollo shines a more comprehensive light on this concept.
In fact, Singh & Zollo is the single largest and the most detailed study on more than 500 bank mergers and post-acquisition management.
M&A and Experience: Two Critical Areas
The study takes a step further than just highlighting the relevance of experience to render a successful merger.
Instead, it divides the parameter into separate areas.
The first area is “tactic knowledge,” which refers to the unique experience and perspective of the top executives.
But “codified knowledge, the second area, revolves around norms and routines of the company’s processes. It serves as an integration guide to make the correct decisions and understand the cause-and-effect of making the right calls.
Practically, this area starts once you decide to implement and strike a merger and acquisition deal. For instance, you can view the readjustment of company processes and practices to align with new models and staff selection as codified knowledge. It means the new practices have to cater to new benefits and compensation packages of the selected staff.
M&A Deals: New Challenges, More Opportunities
Here’s the thing: each M&A deal poses new and distinct challenges and requires a certain degree of, say, personalized adaptation to integrate new processes and practices.
Anyhow, talented managers who understand the intricate details of mergers adapt and embrace a structured and integrated approach to increase the value of the entire acquisition deal.
The more managed structured integration means more chances for the organization to achieve growth. For instance, more experienced integration and executive managers ensure a swift, disciplined, and practical approach to fulfill their integration efforts.
Here are the most quintessential elements that determine the positive outcome of flawlessly managed integration:
1. Quick Integration
The study affirms that it is ideal to opt for a structured integration process rather than an unsystematic and scrambled approach to finalize a successful merger. In one example, key executives managed to achieve more in two months that would have taken a long time in a systematic approach.
2. Executive Alignment
The same merger example highlights that once you reach the end of the planning session of the executive summit, your synergy opportunities become more understandable and clear to the leadership team. After that, you can assign the integration teams to execute the plan.
3. Cost-effectiveness
When integration teams are directly involved with the cost-benefit ratios, they can figure out more cost-saving opportunities. Ordinarily, these costs would have been invisible to the key decision-makers.
4. Maintaining the Same High Productivity Standards and Customer Interest
When it comes to M&A, there is usually a financial, customer, and operations’ impact on the organization. Through the integration approach, executives managed to avoid these disruptive elements at an early stage. As a result, it becomes possible for integration managers to focus on the successful daily operations of the business.
5. Achieving Growth beyond Projected Synergies
With a systematic approach, the key executives projected a $100 million worth of cost synergies in the first eighteen months of the merger deal. But integration approach managed to achieve synergies of $120 million in the first 12 months.
Consequently, financial analysts couldn’t stop but praise the impeccable synergy planning, tracking, and processing to achieve the company’s overall synergy capture at more value and within a short time. It would be fair to say that the integration process is perfect for organizations to coordinate and move forward in an efficient manner.
6. Efficient Response Mechanism
Due to the integration approach, the parameters are clearer that makes it easier to resolve the concerns or issues of the workforce. With a clear communication line, staff can see objective and well-defined integration processes that may have had an impact.
About the Author
Michael Megarit is a partner with Cebron Group.
With over 25 years of domestic and international corporate finance experience,
he provides M&A and capital advisory to high-growth technology companies.