Companies form mergers so they can ward off competition, enjoy increased efficiencies, adapt to economic changes etc. The two parties to a merger have several differences but when a merger is agreed, all of these must be consolidated into a new single company.
Merger Integration refers to the processes, during or after the merger has been agreed, which ensure that assets, business activities, and personnel of the parties to the merger are combined. Successful integration is essential for avoiding the risks of concentrations (mergers and acquisitions), and it helps to realize the potential value of the merger.
Merger integration can be divided into two forms which are pre-merger integration and post-merger integration.
This involves all the processes or attempts to consolidate the activities of the two businesses even before the merger agreement is signed. This is necessary so managers can assess whether the two companies are compatible or not and whether it will be a viable merger or not.
This includes the performance of accurate research and thorough analysis of the business portfolios and markets. Managers or professionals in charge of the merger may draw up a comprehensive overlay of how both companies will look like when they are merged. They also create a roadmap, with very detailed instructions, to help maximize synergies and operational performance.
Post-Merger Integration is the aspect of the merger process, after the agreement of the merger has been finalized, which combines the business activities, personnel, and assets of the participating companies. Depending on various factors, post-merger integration activities may span over a few months whiles in some cases it could span over a couple of years after the merger agreement has been signed.
Post-merger integration activities may involve processes such as coaching, guiding and mentoring staff and managers as well as meticulously following the comprehensive roadmap which has been laid down. In some instances, an interim executive management may be created before eventually appointing the full-time or permanent management of the merged firm.
Even though post-merger integration refers to activities that are performed after a merger agreement has been signed, it is a critical aspect of merger integration which should be discussed and well planned before the deal is finalized.
Challenges in Merger Integration
Observation shows that some companies have difficulties during merger integration and some of the common challenges faced are:
- Loss of key personnel: Often, companies procrastinate or it takes them too long to establish new organizational structures and leadership. Eventually, the highly skilled executives and personnel may leave for employment elsewhere. By the time the merged firm is ready to appoint its management or executives, a good number of the skilled personnel may have left already. The inability to address cultural matters or differences also affects how personnel feel about the new working environment which may cause them to leave eventually.
- Unattained targets: Sometimes, the companies are unable to define clearly and concisely what the deal’s key risks and sources of value are. As a result, they are unable to set clear priorities for the integration which leads to missed targets. For instance, after a merger has been formed, some acquiring companies anticipate that the personnel of the acquired company will automatically integrate themselves.
- Poor performance in the core business: Sometimes, the integration process takes too long and soaks up so much energy such that managers become distracted and deviate from the core business.