Post-merger integration

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Post-merger integration or PMI is a complex process of combining and rearranging businesses to materialize potential efficiencies and synergies that usually motivate mergers and acquisitions. The PMI is a critical aspect of mergers; it involves combining the original socio-technical systems of the merging organizations into one newly combined system.

Overview[edit]

The process of combining two or more organizations into a single organization involves several organizational systems, such as assets, people, resources, tasks, and the supporting information technology.[1] The process of combining these systems is known as 'integration'. Integration Planning is one of the most challenging areas to address pre-close during a merger or acquisition.[2][3] Even though culture clash between companies can cause integration problems, only 4% of the executives in a survey by Pritchett, LP reported that their organizations include culture-specific questions in their due diligence checklists.[4] Culture specific due diligence may include cultural screening and creating a cultural profile of the target firm. GE Capital conducts a cultural assesment of prospective candidates against metrics such as trust in existing managers, language barriers, and operating processes to then facilitate a culture work out session between both sides.[5]

An example of a typical structure for an integration consists of three layers: a steering committee, an integration management office (led by an integration manager) and a variety of additional teams organized by function (i.e. sales, human resources, finance, and information technology, etc.) and/or by business unit, product line, process, or geographic location.[6]

The integration management office, or IMO, manages core functions of the integration effort and provides structure for integration delivery.[7] In a survey by Global PMI Partners of 143 M&A executives, 67% of respondents incorporate IMOs during an acquisition on at least half of their initiatives in a cross-border setting.[8][verification needed]

More communication to employees is usually necessary during post merger integrations than during day-to-day operations.[9] Fortunately, many of the questions from employees can be anticipated.[10]

Achieving successes early in an integration can help build confidence in a deal and quiet skeptics.[11]

Common problems that may be encountered during post merger integrations include resistance to change, divided loyalties, blurred roles and responsibilities, unclear reporting relationships, communication tangles, job insecurity, unusual employee turnover, and infighting. [12]  


Organizational lifecycle[edit]

Integration fits within an organizational lifecycle or specific business mergers and acquisitions cycle where businesses buy, integrate, then dispose of businesses:

  • Definition of vision & strategy
  • Selection of growth method: organic vs inorganic
  • Target identification
  • Pre-deal evaluation & due diligence
  • Negotiation & deal completion
  • Post-merger integration
  • Acquisition integration
  • Ongoing improvement
  • Disposal

See also[edit]

References[edit]

  1. ^ Anthony F., Buono; Bowditch, James L. (1989). The human side of mergers and acquisitions: Managing collisions between people, cultures, and organizations. San Francisco: Jossey-Bass Publishers. ISBN 1-55542-135-0.[pages needed]
  2. ^ Dr. K.M. Popp. "Merger Integration Due Diligence". Mergerintegration.eu. Retrieved 2014-07-21.
  3. ^ [1][dead link]
  4. ^ "Corporate Culture: The "X Factor" in Merger Success and Failure". Mergerintegration.com. Retrieved 26 June 2019.
  5. ^ Lee Marks, Mitchell; H. Mirvis, Philip (December 2011). "A framework for the human resource role in managing culture in Mergers and Acquisitions". Human Resource Management. 50 (6): 859–877. doi:10.1002/hrm.20445.
  6. ^ "The 5 Critical Elements of an M&A Integration Plan". Mergerintegration.com. Retrieved 26 June 2019.
  7. ^ Hofmeyer, Stefan; Whitaker, Scott C.; et al. (2016). Cross-Border Mergers and Acquisitions. Hoboken, New Jersey: John Wiley & Sons, Inc. ISBN 978-1-119-04223-5.[pages needed]
  8. ^ "Post-merger integration specialists – cross border experts". Gpmip.com. Retrieved 26 June 2019.
  9. ^ "Top 10 Reasons Why More Employee Communication Is Necessary When Merging Companies". Mergerintegration.com. Retrieved 26 June 2019.
  10. ^ "M&A Common Questions from Employees, Customers, and Media". Mergerintegration.com. Retrieved 26 June 2019.
  11. ^ "Engineer Early Success in Your Merger". Mergerintegration.com. Retrieved 26 June 2019.
  12. ^ Price, Pritchett; Pound, Ron (2018). Smart Moves: A Crash Course on Merger Integration Management (PDF). Dallas, Texas: Pritchett, LP. p. 8. ISBN 978-0944002032.