It is important to have these 10 key components in place to ensure that the merger has the best possible chance of succeeding.
Companies spend more than $2 trillion on acquisitions each year, yet the M&A failure rate is between 70% and 90%!
These costly deals require a great deal of due diligence before the deal is closed. Nevertheless, M&A deals do fail, whether it be due to cultural differences or integration issues, among other things.
Without a plan, there is a real danger of confusion, delays, and ultimately, the merger falling through. Here’s our 10-step plan to a successful M&A.
- Organizational structure: Deciding on the new organizational structure of the merged entity is important to ensure that everyone is aligned and working towards the same goals.
- Communication plan: Keep clear and consistent communication, it is vital to keep employees, shareholders, and other stakeholders informed and engaged.
- Governance: It’s also important to have in place strong governance and risk management to provide clarity of roles, responsibilities and accountabilities as well as clear decision making and escalation routes.
- Due diligence: Look at the financial, legal, and operational aspects of the merging companies is essential to identify any potential risks or issues.
- Benefits: Remember the rationale for the merger in the first place. It may be about cost synergies or could be about access new markets or capabilities. Don’t get caught up in the process and forget to focus on the original benefits.
- Integration management: Establish a dedicated team to manage the integration process and give them responsibility for working with the business to ensure that all aspects of the plan are executed effectively.
- Cultural alignment: This may take time, as this can be the reason why mergers go wrong. This be achieved by identifying and communicating the shared values, goals and vision of the merged entity. Inclusive, open communication and collaboration among employees will be key for them understanding and adapting to the new culture, and providing training and support to help employees understand and adapt to the new culture.
- IT integration: This can be a key source of cost synergies but also a key stumbling block, so it needs to be approached carefully. A roadmap needs to be developed to ensure that systems can be easily integrated to minimize disruptions and ensure that the merged company can continue to operate smoothly.
- Regulatory compliance: Ensure that they are in compliance with all relevant laws and regulations, and that the merger will not create any legal or regulatory issues. This can be a stumbling block as businesses may need to be sold in order to comply, and this can also slow down progress in the Competitions Authority get involved.
- Change management: Mergers can be unsettling disruptive for employees, especially if cost synergies are part of the rationale. Appropriate change management techniques will help to communicate the vision and rationale for the merger as well as help the teams to get behind the merger as time progresses.
Finally, complete a post-merger integration review, it’s is important to conduct a review to evaluate the success of the integration plan and identify any areas that need improvement.