How to Perform a Successful Post-Merger Integration
There comes a time when a business gets an opportunity to acquire and merge with another business. Such instances arise as per to the different business strategies that a business may initiate. The merger process is always uniform regardless of the strategies, the niche in which a business operates and the needs of the business. As such, all businesses have almost similar experiences when acquiring and merging another business. Logically, the merger process comes into effect depending on a wide number of reasons or businesses needs of the two business entities involved. Therefore, when merging, it is of great importance that the acquiring business, apart from observing all the terms and conditions of the merger agreement, also ensure they effectively reinvent the business they will have acquired to blend in with their ambitions and market needs so as to guarantee sustainable profitability.
In this article, we look at 1) post-merger market integration, 2) post-merger business management integration, 3) products and services integration, and 4) a conclusion.
POST-MERGER MARKET INTEGRATION
Every business has a way of ensuring that its presence is felt in the market it operates in. In this context, when a merger is initiated, it is important for an acquirer, on top of maintaining its presence in the market, to place and sustain the presence of the new business that it will acquire in the market. Therefore, when initiating post-merger integration, the acquiring ought to ensure that it employs the best strategies that will guarantee that the new business fits perfectly into the market as a new entity whose aims and aspirations stand to benefit the acquiring business. In order to attain this, the acquiring market ought to adjust the following:
Branding is usually an exercise intended to attract customers, alert competitors of the business’ presence and generally stamp the influence of the business in the market. Pilar Domingo argues that branding is intended to make a business humane. It is through branding that a business is able to attract success and profitability if the right strategies are employed. As such, post-merger integration ought to be undertaken in a way that guarantees the newly acquired business adopts a brand that complements that of the acquiring business. In order to attain this, the acquiring business should choose any of the following strategies:
- If the acquiring business is already a successful entity and brand in the market, the acquired business ought to be assigned the same brand as that of the acquiring business. Even if the two businesses operate in different niches, it is important that the newly acquired business takes up the branding strategies employed by the acquiring business. This may include changing the name of the acquired business in such a way it takes up the name of the acquiring business.
- If the acquired business is more successful than the acquiring business, it is important that the acquiring business considers adopting the branding strategies of the acquired business. This is because, in instances when mergers involve the acquisition of a business more successful than the one acquiring it, obviously it is a strategy aimed at improving the efforts of the acquiring business in its quest to attain success. Therefore, such instances may demand the acquiring business changes its branding strategies to compliment those of the acquired business.
- When the two businesses are at the same level, it is up to the acquiring market to craft strategies that will ensure that the branding of the new business meets the market demands. In such instances, the acquiring business has the chance to bring in new changes that will influence success at the way branding is done in the market of the new business.
Branding efforts in post-merger integration should not be blinded by the quest to attain profitability. Post-merger market integration should ensure the branding strategies to be adopted enable the business to attain all its goals and ambitions wholesomely.
The Marketing Strategies
The marketing strategies ought to change in line with the needs of the acquiring business and according to the demands of the market as may be perceived by the acquiring business. It will be up to the marketing strategists of the acquiring business to determine what new marketing strategies ought to be initiated and which ones ought to be eliminated from those held by the acquired firm. Therefore, it is important that the market needs are fully analyzed as at the time when the merger process is over, and the acquiring business takes over the running of the newly acquired business. All in all, marketing strategies ought to be integrated in a way that they meet the needs of the market of the acquiring business.
It is not always that the acquiring business initiates automatic changes to marketing strategies once the merger process is complete. It is important that all conditions are studied before the decision to bring in changes to the existing strategies. At times, changes end up disappointing and bring in a trend of losses and a decrease in value to the acquired business. Again, there are cases when such changes bring in a trend of profitability and increased of products and services in the market. Therefore, it is up to keen analysis before the decision of whether changes to the current marketing strategies are necessary or not. When a decision to bring in new changes is reached at, the marketing strategists ought to be tactical and ensure there is a buffer which will guarantee that the products and services will not be exposed to market shock.
POST-MERGER BUSINESS MANAGEMENT INTEGRATION
Post-merger business management integration is another important task that ought to be effectively and efficiently undertaken once the merger process is complete. Realistically, management is the most important aspect of business that will determine if a business remains successful or it fails. Management involves the utilization of resources. Given that a newly acquired business may not have its resources fully understood, it is important that the post-merger integration process fully analyzes all the different management issues involved in the running of a business. Therefore, for the merger to attain its much yearned for success, it is important that all the management departments are streamlined or reinvented to ensure high levels of efficiency in the way they coordinate and utilize allocated resources with the aim of attaining the business goals of the acquiring business. During this kind of integration, the following aspects of management ought to be looked at:
Human Resource Management
In the quest to ensure effective post-merger business management integration, it is important that the human resource sphere of management is fully understood; how it operates and how it can be adjusted to meet the needs of the acquiring business. Human resource management usually involves how the human workforce is utilized to attain the goals and ambitions of a business in the market. Therefore, upon a merger, it is important that the acquiring business understands the human workforce of the acquired business.
Charles Knight and Ryan Brian argue that the effects of a merger on employees should never be overlooked. In most cases, mergers negatively affect employees. Mergers bring about a sense of job insecurity even if the real cases of job loss are limited. Therefore, the acquiring business should make it a priority to ensure that the human resource management strategies during post-merger integration are effective and all the employees of the acquired firm do not lose the motivation that brings in positive results, improved productivity and profitability in a business.
General Management Culture
The post-merger integration process must involve a significant change in the management culture of the acquired business. There should be signs of change in management once the new team of managers from the acquiring business takes over. This change of the management team automatically brings in a shift in how the newly acquired business will be managed. As such, the management culture must change, and it will be best if the management culture change is positive and effective.
There may come up a need to adopt a new business model for the acquired business once the merger process is over, and the acquiring business has taken over the management of the acquired business. Changes regarding the business model are often intended to ensure that the business in question is perfectly aligned for success in the market. However, such changes are often complex, and it is up to the tactical management experts to ensure the business model to be adopted fits into the perspective of the aims and aspirations of the acquiring market. Adopting a new business model may be expensive but if perfectly undertaken, the acquiring business will be guaranteed of success both internally and at the market level.
The good thing with post-merger integration as regards to management culture is that there is availed an opportunity window which will guarantee that the acquiring business sets in and brings into the acquired business the necessary changes in management that will improve all the aspects of business of the acquired business. It is popularly conceived that business success is controlled by the effectiveness of the management culture that a business adopts. Therefore, the team of manager setting in to control the newly acquired business put in place measures that will guarantee that the business attains and maintains success and profitability.
PRODUCTS AND SERVICES INTEGRATION
Majorly, mergers and acquisitions are sought with an aim of trying to control the products and services offered by the involved businesses. The acquiring business, depending on its ability, acquires another business aiming to control the products and services it deals with in the market. There is a popular belief that businesses that decide to merge deal with the same products. However, there are cases where mergers and acquisitions have involved businesses with entirely unrelated products and services and operating in entirely different niches of the market. However, with proper measures it is possible to contain these differences and maintain or devise new ways to attain business success. The post-merger integration process as such must ensure that products and services of the acquired firm are adjusted to meet the needs of the acquiring business. Below is a guide on how this will be attained.
Product and Service Development
Upon a merger, the acquiring business becomes responsible for all the operations of the acquired firm. In other terms, it becomes responsible for all the products and services that the acquired firm deals with in the market. Therefore, it is up to the acquiring firm to ensure that all the products and services are developed to meet its projected needs. The development of products and services by the acquiring firm must include all the necessary steps that will associate it with the products and services once they are out in the market.
To ensure that the acquiring business attains success, it should ensure that it incorporates innovative tactics on the products and services. Modern markets dictate continuous innovation and improvement on products and services if maximum success and profitability are to be attained. Therefore, post-merger integration efforts must be directed at ensuring that the acquired firm attains best levels of success with the products and services it deals with if the acquiring firm is to benefit from the merger. Therefore, it will be up to product and service strategists to work and encourage a trend of innovativeness in the products and services of the acquired firm.
Product and Service Presentation
Modern markets tend to identify easily and associate specific products and services to specific businesses and brands. Shelly Kramer argues that it is important that the acquiring business in a merger agreement initiates effective strategies with which to use in their bid to maintain the presence of the acquired business in the market while also claiming ownership of the products. However, depending on a numbers of factors, instances may arise which may demand that the acquiring business drops any association of the previous business (before it was acquired) with the products and services once after the merger is complete.
In presentation, the acquiring market ought to ensure that, after the merger is done, products and services do not loose their visibility in the market. There will arise opportunities that will see to it that the presentation of the products and services in the market is fully accepted if the acquiring business initiates creativity on the way it presents the products and services of the acquired business in the market. In addition to this, the acquiring business should ensure proper packaging and advertisement of the products and services of the newly acquired firm. It is through this kind of strategies that the merging initiative will guarantee utmost success and attainment of goals.
The post-merger integration process remains the best way to ensure that the merging business attains success in the market. Without proper post-merger integration strategies, all other efforts may proof to be futile and of no essence. Therefore, it should be a priority of the acquiring firm that, once after spending huge amounts of funds and resources, the merged business attains its much yearned for success. There are some aspects about the merger itself that will dictate how post-merger integration will be conducted.
Majorly, it is the type of merger that will guarantee whether the post-merger integration will be easy or complicated. However, regardless of all the difficulties that may be encountered when trying to initiate an effective transition in ownership and market operations, those in charge should ensure high regard to discipline and keenness so as to capture all important details regarding the acquired business and the market demands. All legal issues should also be observed, and it is important that the post-merger integration process adheres to all the agreed terms and conditions so as to avoid suits and other injunctions.
In Berlin we meet Ciarán O'Leary who is a partner at the venture capital firm Earlybird. …