Written by Joris Vanthienen
A brisk yet stable pace managed by a central integration management office
Summary: M&A transactions have a very high failure rate. Mainly due to failing to integrate the two parties involved. To achieve success, it's important to drop the P in Post-Merger Integration and consider integration as a holistic process. Ideally starting when formulating the strategic rationale of a transaction. We’ve seen that top performers prioritize merger integration projects and follow BrightWolves’ six principles for successful integration. Today, we’ll dive into the second principle: controlled speed.
First things first: assess legal and data sharing considerations !
It is absolutely crucial that integration leaders collaborate with their (internal or external) legal counsel to comprehend the legal requirements and regulatory considerations of the deal at hand. Although legal risks and issues may have been identified during the diligence phase, the integration process will have its own unique legal guidelines. The deal may require approvals from various regulatory bodies across multiple jurisdictions before it can be finalized.
In addition to legal considerations, it is essential to establish confidentiality expectations and data-sharing guidelines with the integration team. Since a significant amount of data needs to be shared between the organizations, a secure data-sharing platform or clean room (we mostly work with Ansarada) may be necessary for sensitive information.
If you’re planning integration before deal closing, it is important to prevent the sharing of competitive information and exerting undue influence on the target, known as "gun-jumping," to avoid violating antitrust laws.
Find a brisk yet stable pace: not too fast, but surely not too slow.
One of the key factors that highly impacts the success of your post-merger integration is the speed at which the integration takes place. Controlled speed in post-merger integration means moving quickly to realize the benefits of the merger, but with caution and thoughtfulness to ensure a smooth and successful integration. It involves taking the time to plan and execute the integration process in a way that minimizes disruption and risk. Moving too fast can lead to mistakes, oversights, and conflicts, while moving too slowly can result in missed opportunities and delayed benefits.
“As a general rule, it works best to speed up decisions instead of focusing on precision. At the same time understanding there is no ideal integration speed.”
At BrightWolves we see 4 reasons why controlled speed is so important in post-merger integration:
Minimal disruption for all parties: Post-merger integration will be a disruptive process for employees, customers, and suppliers. Moving too fast can increase the level of disruption, causing confusion, uncertainty, and resistance.
Minimal risk: Post-merger integration can also be a risky process in terms of legal, financial, and reputational risks.
Ensuring cultural fit: Moving too fast can lead to cultural clashes and conflicts, which can undermine the success of the merger. By moving at a controlled speed, companies can take the time to assess and address cultural differences, and develop a cohesive culture for the merged entity.
Realizing Synergies: One of the main benefits of post-merger integration is realizing synergies, such as cost savings and revenue growth. Moving too fast can lead to missed opportunities for realizing synergies, while moving too slowly can result in delays in realizing benefits.
The best in class speed to complete a merger integration can vary widely depending on a number of factors, such as the size and complexity of the companies involved, the industries they operate in, and the scope of the integration. In general, the first 100 days are crucial. But we take as a benchmark that the most successful integrations are typically completed within the first two years. But one should not be too fixed on the timeline, it’s more important being flexible and adaptable throughout the process to ensure success.
“In general, we take as a benchmark that the most successful integrations are typically fully completed within the first two years. But avoid being too fixed on the timeline and try to be flexible along the way.”
Set up an Integration Management Office (IMO) to keep up the drumbeat
To keep a continuous pace, a centralized project governance should be established and should include the following elements:
Integration Steering Committee: The Steerco consists of Senior leadership and sets and champions the vision and objectives for the integration. Active and visible executive sponsorship is critical for ensuring the success of post-merger integration projects. The governance framework should establish clear lines of accountability and provide adequate resources and support to the integration team.
Integration Management Office (IMO): The integration management office has overall responsibility for project coordination and management, updates to the Steerco and escalations of unresolved issues.
Cross functional integration execution teams: In the integration execution teams, this is where the real integration work happens. Mostly they will be functionally organized (cfr. Our previous article on Clear choices in the functional chapters)
Figure 1 - Integration Governance Pyramid
The governance framework should equally define the roles and responsibilities of all stakeholders involved in the integration project, including the executive sponsors, the integration team, and other functional teams.
By following the approach described above, BrightWolves was able to do a carve out for an international player in the Food&Beverage industry helping them realize €4,1 mio OPEX reduction.
Next week, we’ll dive into our third principle, Craft.
See you then!
Need help setting up your M&A for success? BrightWolves offers consulting services along the full M&A spectrum: ranging from helping to define your M&A strategy, to target screening & selection, commercial due diligence, deal closing and post-merger integration. Do not hesitate to reach out to our expert, Joris Vanthienen