Opinion: M&A Business Value Is More Important Than Post Merger Integration
By GPMIP Partner, Stefan Hofmeyer
I am currently contributing to my second book on post merger integration (PMI). Being a relatively new author, I sometimes forget that what comes as second nature to me may be different for others — we each have different perspectives based on our business experience.
The un-Exciting World of PMI
Post merger integration is not an exciting topic for the majority of executives. To M&A deal makers, it is the mundane activity that happens after a transaction is complete. Whether being a 3rd party transaction advisor or a corporate executive, there is a tendency to move directly on to the next deal and let operations take over integration needs. This is driven by both financial incentives and general interest.
Starting my career at Accenture, I’ve moved up the value chain and now focus on PMI exclusively at my firm, Global PMI Partners. Whether it be my combination of engineering and business education, or my desire to tackle the perfect storm of people, process, and technology change after a merger or acquisition, this work is rewarding and of interest.
The Executive Mindset – Gaining Business Value
In the marketing of our services, I have found that PMI work needs to be reframed as work to gain business value – this matters to executives. It resonates that over 50% of M&A transactions fail to meet expectations, and that after a transaction, immediate business value is almost always lost.
The Integration Tasking of Operations
Far too often operations teams, who are strapped with their daily activities, take on integration work and ownership after the deal team moves on. The operational leader’s time is split between their day job and the integration, resulting in competing priorities where day-to-day operations typically win out. In this situation, there is a risk that pro forma expectations of the deal are not understood by the integration team and related synergies are not being tracked or realized.
The Consultant Trap
An alternative to using internal resources is to hire a consulting firm to service integration needs, but in this case the integration may be left to people who lack intimate knowledge of the business and who by definition are not permanent. Over-reliance on a consulting firm may transition the integration risk from internal executives to consultants, but this does not mitigate integration risk of the acquiring company itself.
Planning and Education
What is the solution? Integration planning prior to transaction close is a must to successfully gain business value during a merger or acquisition. This includes planning to ensure the deal thesis and resulting business value is implemented and audited during integration– with properly balanced engagement of internal and consultant team members.
Integration team education and level setting should be of emphasis. Although internal resources may have experiences with merger and acquisition integration, this comes from specific experience that may not necessarily be fully applicable to the current integration. Although downplayed by consulting firms, their resources may also be in the same predicament. Having the integration team on the same page regarding how to plan, govern and execute the integration is of greatest value.
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