After the closing of the transaction, the last phase of any M&A process is the integration of the acquired company into the acquiring company. This is in fact the ultimate goal of any merger or acquisition, and its success depends to a large extent on its prior preparation.
Post-acquisition integration (also known as PMI or post merger integration) is the assimilation and sometimes restructuring of the acquired company. In this process, the processes, organisations and business areas of the entities involved are harmonised. The objective is that at the end of the process there is a single organisation in operation and not two separate organisations with incompatibilities or redundancies in their structure and operation.
We will review the best way to plan this key process for the success of any M&A transaction.
Post-acquisition integration steps
Although no two M&A projects are the same, in general we can distinguish five phases in the PMI process.
Planning
The duration and effort involved in the PMI process should never be underestimated. Integration planning should start as early as possible, at the same time as the definition and planning of the acquisition strategy. Otherwise, if left to the end, you risk creating an unnecessary level of complexity in the integration.
The first general plan should contain the main steps and objectives, but it is not possible to draw up a detailed project at this stage. For this reason, throughout the M&A process, it is necessary to gradually incorporate all new information that becomes available. For example in the course of due diligence. The integration process must be dynamic, in order to achieve a PMI that is increasingly accurate as the M&A process progresses.
Creation of a new management chart
It is imperative to carefully create a new management organisation that not only matches the structures of the acquirer and the acquired company, but also creates a single optimal structure for the new company resulting from the M&A process. This involves defining precisely which competencies will be assumed by the general management of the company and which will reside in the different business units acquired, distinguishing by functions, sectors and regions if necessary.
Appointment of senior staff
Once the distribution of competencies has been made, the people who will fill each of the positions need to be appointed. To do this, it is important to design a fair selection process and criteria. The most common is to start with the appointment of senior management. These, in turn, are responsible for appointing the managers under their hierarchy.
Harmonisation of operational processes
This is a key point for the success of the integration. It has to be decided which processes of the acquiring and acquired company can or should be taken over and which should be redesigned.
Creating a common corporate culture
No PMI process is successful if it does not take into account the cohesion and satisfaction of the employees. Because the very announcement of an M&A process is a source of uncertainty for employees. It is therefore important to develop a common corporate culture with which employees can identify, to use training measures, to adapt incentive schemes, etc.
Conclusion
Companies are not normally undergoing M&A processes all the time. That is why it is essential to have specialised advice throughout the whole process. If you would like legal and tax advice on post-acquisition integration, Confianz can help you.