The five most effective methods that influence success in the M&A market. What are the ways to ensure effective post-merger integration?
Although a lot has been written about the factors influencing the success of a company after a merger or acquisition, only a few researchers have delved into the issue of integrating finance and accounting of merged companies. Meanwhile, detailed planning, effective communication and speed of execution of decisions are very important here. The integration process in this area is also complicated by the need to assess and protect business assets, the study of IT systems, the conversion of accounting procedures, as well as the analysis of post-integration synergy. We recommend following the “five – step practice”, which will help to take into account the needs of the business during the merger and establish control over finances. The following model guarantees compliance with key procedures and provides a clear and clear guide to action.
1. Synergy and maximizing value
Achieving synergy is one of the key components of an operation’s success. According to estimates provided by 52% of managers surveyed, the total benefit generated from the synergy process between companies was less than half of the total transaction value. The goal of ensuring maximum synergistic effect is to create value – increase operating profitability, strengthen the balance sheet and ensure shareholder value growth. There are several similarities between companies that have successfully integrated acquisitions and a well-thought-out synergy process. These features cover holistic planning, comprehensive pre-investment analysis, and understanding the complexity of implementing the pooling process across all aspects of the business.
2. Readiness level
By devoting a lot of time and resources to making a deal, it is very easy to lose sight of the procedures that ensure the functioning of the business after the merger process is completed. The post-merger integration reports note that one of the main reasons why mergers and acquisitions do not bring the expected benefits is insufficient preparation for the period after the merger process is completed. Taking into account specific areas of activity, respondents named the information technology industry as one of the functional areas with the highest need to improve the effectiveness of skills and opportunities for integration.
3. Organizational factors
Critical to ensuring a successful integration process is the development of an appropriate plan that provides for optimized use of resources and budget, as well as administrative support from the management of both companies involved in the transaction.
4. Operating model
Operational models have an extremely strong impact on productivity and competitiveness, and according to research, they are especially relevant when combining companies that are different in their areas of activity.
5. Communication and corporate culture
Transparent communication with employees on an ongoing basis is one of the five main factors contributing to successful integration. The vast majority of managers noted that the “synthesis” of corporate cultures is an important factor for the overall success of integration. At the same time, about 30% of them said that their efforts to integrate human capital were ineffective.
In future M&A agreements, the main focus will be on an accelerated and phased integration process, improving communication efficiency, and more thorough selection of the integration group. A well–designed integration planning process can ensure smooth execution and help ensure that the work done during integration delivers results. By devoting enough time and investing time and resources in detailed planning and taking into account recommendations from an internal and external team of specialists, companies will be better prepared to not only achieve their goals but also exceed expectations from the deal.