Rethinking Your Post-Merger Integration Process: How to Achieve Acquisition Success

Companies spend nearly $2 trillion on acquisitions every year; and it makes sense—M&As present an enticing potential for expansion. However, that’s only if they actually succeed. According to the Harvard Business Review, somewhere between 70% and 90% of these acquisitions fail, leaving acquirers to pick up the pieces.

This arguably startling statistic then begs the question: where do these deals go wrong? How can we better mitigate against failures? Furthermore, what can companies do to avoid the same fate?

While every acquisition is greatly nuanced, failed integration ultimately stems from leadership teams underestimating (or failing to understand) the power of two aspects: the power of objectivity and the power of the people involved. Therefore, successful integration requires a paradigm shift: viewing your post-merger integration as a project or process improvement project. Here’s our advice from the trenches on how CFOs can rethink their PMI and ensure that integration goes as smoothly as possible.

Why Most Acquisitions Fail

It’s not that the CFOs leading these acquisitions are incapable or unaware of the risks that come with acquiring another company. The problem lies in undervaluing the integration itself. As a result, leadership teams often compromise their own ability to see what matters most to a successful transition, which is shortening the time to seeing value.

1. Overvaluing strategy and forgetting to secure team alignment

Often, companies will pour the majority of their resources and focus into proving a deal’s validity and garnering solid evidence for shareholder returns. There’s no arguing that due diligence is critical to success. However, focusing on the financials without giving strong consideration to how the transition affects your end-state team can be a grave mistake.

When entering an acquisition, companies must remember this: growth may also breed disruption and uncertainty. As processes clash, and redundancies are revealed, employees will be wondering how the acquisition affects their futures. Forgetting to account for your team’s confidence, productivity, and trust during the transition risks your ability to build the rapport and synergy necessary for a successful integration. In the end, alienating your team could result in losing top talent… which, in today’s competitive market, could present leadership with an uphill battle.

2. Failing to assess risks BEFORE integration

One of the biggest mistakes companies make is failing to identify risks before and during the integration. Companies dwell in an extended transition period, focusing ever-increasing levels of resources directed exclusively towards putting out unforeseen fires such as culture clashes, tech and data integration, security issues, or realizing that the acquisition was a poor business fit—all of which could have been flagged and avoided by a thorough risk assessment.

If this is such an important process, why do so many companies forgo it?

The truth is that transactions are often conducted quickly, in the heat of excitement, and under the pressure of proving the promised value to stakeholders. In other words, companies are biased toward their own success, which leaves them at a disadvantage to identify and mitigate risks.

3. Not enough experience in change management

The most successful acquisitions are viewed and approached with a holistic project strategy. Many companies fail to see their post-merger integrations as a process improvement project, which creates a blindspot for issues such as gross inefficiencies, culture incompatibilities, and alienating your existing customer base. Admittedly, it comes down to having extensive experience in change management.

Ultimately, post-merger integrations require someone who has the financial expertise to lead due diligence, combined with a deep understanding of processes and the people within them.

Acquisition Success: Rethinking Your Approach

Time and time again, we see companies forgo an M&A post-acquisition consultant because they’ve honed in on the end result rather than the process. Taking the time and resources to bring someone in is seen as an avoidable and unnecessary cost. However, acquisition success relies heavily on changing your perspective and seeing consultants as a proactive and strategic move.

Objectivity is Your Key to Success

One of the most valuable aspects of a consultant is their ability to remain objective. Unlike teams that are heavily invested in the growth and opportunities that an acquisition presents, a consultant will be searching for red flags and potential risks, from the due diligence process through integration. Their goal is to evaluate what could go wrong and help you make educated decisions on how to implement new teams and processes. Additionally, in the face of opportunities, they’ll be able to guide you to logical and strategic solutions.

Capturing the Right Expertise

The right consultant will be someone who not only has the financial, functional, and relevant industry expertise, but also has deep experience and proven success with PMI methodology, process improvement, project management, and change management. Post-merger integration is a great balancing act and it requires the right fit.

Find the Right Post-Merger Integration Expert

No M&A is exactly the same. Successful integration comes down to finding and utilizing a team with experience and expertise in condensing your time to merger value extraction. When it comes to matching companies with someone from our network of consultants, we know that understanding nuance and each unique situation is key to making the right placement. That’s why we take the time to learn about your company’s needs–talk to us today to get started.