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Post Merger Integration

Acquisition & Integration Management

Large scale mergers and acquisitions have been scarce in recent years in part due to the failure to deliver the synergies originally intended. With few exceptions the big players have rather focused on consolidation, divestment and selective acquisition to extend the geographic reach or enhance existing capabilities.

At the same time private equity firms and investors have acquired companies or divested company arms of big conglomerates. However the recent market downturn and subsequent low market capitalization has left significant opportunities for consolidation for companies who can leverage the required financing.

Making acquisitions successful requires dedication in integration. Still most mergers and acquisitions across industries fail to deliver on their original financial promises. Main reasons quoted are misjudgment of cultural alignment or complexity of the acquired company, excessive internal focus, postponement of tough decisions, lack of pre-merger planning and structured execution, and underestimating the role of communication, board sponsorship and early successes.

Half-hearted integration efforts have misfired resulting in parallel cultures, loss of market share, customer cannibalization, and high costs due to process redundancies even years after the acquisition.

Mismanagement of cultural alignment is cited as the number one reason for unsuccessful mergers. Lacking cultural awareness, fairness and sensitivity towards the needs of the acquired company leads to resistance and know-how loss. A typical mistake is premature staffing without taking stock of the capabilities of the organization being purchased. This error reduces the option of picking the best of both worlds. Caution should also be taken to avoid an exaggerated internal focus resulting in dropping the ball in terms of suppliers and customers. These risks can be mitigated by a comprehensive and structured planning of the post-merger efforts, including cultural and external assessments before the go-live date of the merger.

The first step to success is preparing a plan for the first 100 days, including value targets based on business cases, a tough time line, clear milestones and a defined integration structure and roles & responsibilities. Tough messages should not be kept behind closed doors. Implementation success will depend on sticking rigidly with the plan, staying focused on the original targets and taking the required decisions. Quick-win integration projects should be proactively selected, implemented and communicated to boost moral and add credibility. Following the first 100 days, more complex projects are tackled, but the same project-management structures needs to remain in place. Communication is key to the level of buy-in for the changes. Dedicated communication teams need to be installed on the top level to both capture information requirements of the staff and to assess their mood and relay it back to management.

Succeeding in the first 100days and beyond will require strong sponsorship from the highest level of management, which will then take an active role in communication, motivation and success monitoring of the project teams against the originally defined targets. Tough decisions have to be taken fast to reduce levels of anxiety and demonstrate clarity of the approach. It is essential that the integration process remains at the top of management's agenda to ensure continued impetus and to avoid slow down and a premature celebration of success.

Correctly planned and executed integration management is the key to substantial business value and to beating the poor average in the pulp and paper industry. Retaining focus and dedication during integration and focusing on the key areas is the secret to success.

StepChange specialized on pre-merger planning and post merger integration support and has successfully helped integrate acquired companies to deliver on the promised synergy targets.