chapter 7_post merger issues

Post Merger Issues

Chapter 7

© Oxford University Press 2011. All rights reserved.

Integration in Mergers

• Is all about “make him like me”

• Is one of the most complex tasks in the process

• Dealing with acquisitions of resources and liabilities and

integration of various processes is critical for the survival of the

new organization

• Has the potential to enhance shareholder’s value by creating cost

advantages, increase in revenue, increase in market power and/or

intangible synergies, etc.2© Oxford University Press 2011. All rights reserved.

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• Managing of multiple cultures

• Innovating

• Building new teams and

• Managing a complex change process.

Integration in Mergers


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• Demonstrating a committed and open-minded leadership

• Building teams and work units

• Focusing on financial and strategic objectives

• Remaining flexible

• Providing for capable and motivated teams

• Assimilating new people and achieving cultural integration

Activities common to M & A


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• Getting employees to embrace change

• Sharing information and effecting corporate understanding

• Effecting and cooperation

• Setting priorities

• Combining corporate functions and internal processes and

• Measuring results

Challenges faced in Integration Process


• Failure to align leadership, management, and supervisory practices with the new combination's core values

• Absence or lack of guidance about managing the "people factor" in order to maintain productivity and job satisfaction

• Failure to facilitate multi-directional knowledge transfer and organizational learning within the new combination

• Failure to redesign core work processes in a way that involves the employees

• Failure in the selection of appropriate personnel for cross-border and cross-unit assignments

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Issues faced in Integration


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Issues faced in Integration

• Lack of global competencies in key managers and supervisors

• Failure to re-conceptualize performance management and

career

planning

• Failure to align differing benefits and compensation packages

• Failure to facilitate the productivity of geographically dispersed

"virtual" teams

• Slow decision making process

• Failure to provide coaching or mentoring to their subordinates© Oxford University Press 2011. All rights reserved.

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• Communication of the new strategic objectives and the new vision of the merged organization.

• Implementation of a new shared corporate culture and management culture

• Development of a new management structure for the new, larger organization especially overcoming of leadership problems in very large units

• Bringing together formerly separate units from both former organizations

• Harmonization of management compensation and management incentive systems

Tools of Integration


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• Overcoming of language barriers and country specific cultural differences

• Overcoming of staff’s suspiciousness of the other organization - ‘Us vs. Them’ syndrome

• Filling of management positions

• Allocation of responsibilities

• Knowledge transfer among units that are to be integrated

• Maintenance of customer relationships during integration phase.

Tools of Integration


© Oxford University Press 2011. All rights reserved.10

• Mission and vision

• Ensured communication

• Selecting the right leader

• Welcoming new culture

• Teambuilding

• Capturing value from different sources

Factors facilitating Integration


Growth-oriented sources of value:

• New products, service offerings, markets, customer segments, and distribution channels

• Enhanced market presence and market capture

• Enhanced product development efficiency, i.e., leveraged R & D, internal best practices

• Combined technologies or capabilities

• Leveraged sales force

• Increased capture of the value chain

Identifying Sources of Value


Efficiency-oriented sources of value:

• Integrated supply chain

• Leverage procurement volume (product and non-product)

• Production footprint optimization

• Facility optimization

• Vertical integration, de-integration

• Distribution channel optimization

• Sales force optimization

• Headquarters consolidation

• Support function consolidation like human resources, finance, IT, etc.


Other sources of value:

• Financial value such as balance sheet items, taxes, etc.

• Optimized programs and policies e.g. benefits programs

• Rationalization and/or elimination of special programs, projects, etc.

• Additional alliances or relationships



• Provide visible leadership from top management

• Ensure that the transition follows a structured and phased approach

• Ensure that goals are clearly defined and progress is tracked

• Manage change from the outset

• Use best practices to drive the creation of the new organization and its business processes

• Use cross-functional teams to drive merger

• Ensure that communication is well planned and coordinated

• Recognize that a merger is fraught with risk - avoid taking too much for granted

© Oxford University Press 2011. All rights reserved. 14

Strategies for Post merger Integration

• Focus on adding value to the enterprise, while avoiding those actions that can destroy it

• Avoid the compromises that result from playing to politics

• Concentrate on key employee retention

• Identify the leadership who will make the merger work

• Do not leave culture clashes left unchecked

• The "cultural migration" to the desired organizational behaviour is best achieved by visible example along with continuous reinforcement

• IT systems are frequently incompatible



• Recognize the importance of the company's customers and its own people

• Focus on the 80/20 rule

• Avoid over-analysis

• Excessive focus on perfection is generally ineffective

• Do not miss revenue enhancement opportunities that come through cross-selling and the development of new products and services for the expanded customer base.



• Effective human resource strategies

• Social and cultural integration

• Reliable environment for employees and customers

• Well informed stakeholders

• Manage expectations

• Change agent

• Effective schedule

• Detailed market research


Factors influencing Post Merger Growth Strategies

Thank you!


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strategic objectives

oriented sources

identifying sources

integration

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