Written by Robin Dehondt and Jan Verdonck
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 last principle.
Principle 6: Measure and Control
Fact-based decision-making has been shown to overwhelmingly outperform intuition-based decision-making. Thus, to empower leaders to make strategic choices confidently, accurate data and insights are required. Therefore, ‘Measure & Control’ is of high importance.
How to know if the PMI is successful?
Different dimensions of PMI may reflect success. Which ones these are is for each PMI to determine individually. A heads-up: success goes beyond just financial indicators.
Here are some crucial aspects to consider.
1. Financial Performance:
Indicators such as revenue growth, profit margins or cost savings are essential and reflect the financials of the PMI. The integration’s impact on the bottom line can be evaluated by comparing the pre-and post-merger numbers.
2. Customer Satisfaction:
To ensure a smooth transition and for retaining the customer base, maintaining customer satisfaction is vital. Gauging the customer needs via regular customer surveys and feedback mechanisms is one way to do so.
3. Employee Engagement and Retention:
Keeping an eye on the company’s most valuable asset, its people is a must. Identifying potential issues by monitoring job satisfaction, employee engagement and retention rates can retain top talent.
4. Cultural Integration:
One of the most challenging aspects of PMI is cultural alignment. Areas, where further efforts are needed to foster collaboration and synergy, can be highlighted through surveys, focus groups and other means.
5. Operational Efficiency:
Crucial to unlocking cost synergies and improving overall productivity is the assessment of the efficiency of integrated processes and systems. In this regard, KPIs help measure the effectiveness of operational changes.
6. Synergy Realization:
The primary driver behind most mergers is synergies. Measuring and evaluating the realization thereof is an indication of the merger’s success in delivering the expected benefits.
Measure and control are the symphony conductor's baton, orchestrating the merger's harmonious progression.
The Importance of Controlling in Post-Merger Integration
Does the integration proceed according to plan? Or does it deviate from the established roadmap? To answer these questions, a robust controlling framework is essential. Why? Because of several reasons:
1. Alignment with Strategic Goals
To stay aligned with the strategic goals that led to the merger in the first place, a vigorous controlling mechanism is necessary. This mechanism will help track progress, ensuring that the integration stays on track to achieve the initially intended benefits.
2. Risk mitigation:
Employee resistance, cultural clashes and operational disruptions are all risks inherently associated with M&As. Controlling identifies and mitigates these risks, minimizing their impact on the process of integration.
3. Resource allocation
Controlling ensures that the limited resources of merging companies are allocated optimally to achieve maximum value creation and synergy.
Decisions during PMI can have extensive consequences. Controlling furnishes the necessary data and insights, essential for well-informed decision-making. Controlling thus results in a heightened sense of confidence and assurance.
To ensure a successful and fruitful union of the two companies, controlling and measuring the PMI are indispensable. Comprehensive measurement mechanisms offer insights into progress and performance across various aspects, while a well-designed controlling framework provides the overview to track integration. By combining effective control with meaningful metrics, companies can navigate the complexities of PMI with confidence, maximize synergies, and achieve their strategic objectives.
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.