Thought Leadership  •  May 03, 2021

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Optimising the Post-Merger Integration Process

Mergers and acquisitions promise to create value for the business, but they are only truly successful when there is an integration practice after the fact. Read on to learn what the post-M&A integration process entails and the steps to take to set the new company up for success.

What Is a Post-Merger Integration?

The post-merger integration is a tiered set of processes during which the businesses are rearranged to reflect the new business structure. When companies merge, there are redundancies — both companies have accounting or finance departments, for instance. Both have administrative personnel, sales associates and customer databases.

Regardless of the industry, these examples show how the new business needs to streamline operation post-merger to efficiently respond to opportunities. By planning, both parties can determine where there are opportunities to leverage and where there are redundancies that must be eliminated.

While every post-merger integration strategy will look a little different, there are a few common stages for which companies can plan. These include the following:

  • Value: Value is often a driver of the merger, so it is usually the first area to be addressed. Businesses can develop cost goals as well as revenue goals when determining value proposition. While many will look for synergies or efficiencies that can be leveraged to save costs, a company can act to expand revenue streams in the wake of a merger or acquisition.
  • Organisation: Blending companies means blending corporate cultures and enterprise talent. While in an ideal world there would be a place for everyone, some reductions may be necessary. Corporations should focus on communication and company culture to help ensure the success of the new business.

When blending cultures, the key is to start early (well before the merger is complete) and keep the purpose of the business deal top of mind. When cultural changes can be tied directly to strategic initiatives, employees are more likely to support the shifts in their working environment.

  • Direction: A merger or acquisition is an ideal pivot point for companies ready to change the way they do business. Whether it's a new philosophy, objective or design, companies should take time to think through how they want to operate after the merger. Consider it an ideal time to shed legacy habits that were outgrown in favour of leaner ways of operating.

While the integration doesn't happen until the merger is complete, planning should begin well in advance. By leaving several months before the deal to iron everything out; the companies can identify and work around areas of difficulty to achieve a successful M&A.

Key Steps in a Post-Merger Integration

There are two sides to a post-merger integration: what the new business will look like, hierarchically, and how the new business will operate on a day-to-day level. Focus on how the post-merger integration plan will work for the business, rather than homing in on only the new corporate structure. Develop a short-term and long-term plan for how the new business will operate by addressing areas such as:

  • Human Resources
    • Identifying redundancies
    • Addressing benefits packages
    • Handling layoffs and severance as necessary
  • IT/Technology systems
    • Merging systems
    • Eliminating technical redundancies
  • Management
    • Developing training plans
    • Outlining key roles and responsibilities
    • Building new internal procedures
    • Managing employee retention and turnover
    • Shifting organisational culture

While the bullets can be handy as a checklist approach, keep in mind that this is a time-consuming affair that should be addressed as soon as the merger occurs. One of the first action items parties need to consider is what success after a merger looks like. This may seem obvious, but many companies leave this discussion off the table only to realise that the vision of success they're holding is not the same.

Companies may be negatively affected after a merger by failing to focus on the right activities and not addressing corporate cultures.

To keep emotion out of a discussion of the facts, look at financial documents. A profit and loss statement can shed light on opportunities and liabilities.

Once everyone is on board with key priorities, they can tap into existing resources. Priorities will differ with every company, but example priorities could be:

  • Aligning business strategy
  • Retaining core customers
  • Integrating different company cultures
  • Preserving the well-being of employees
  • Maintaining stability in a changing market

Mergers tend to be “all hands-on deck” affairs. Thus, the following people and departments will share the responsibility of integration in the wake of a merger:

  • Top executives
  • HR department
  • Business lawyers
  • Business consultants
  • Specially appointed due diligence team

Get Help With Post-Merger Financial Statements

After a merger, the company is required to file post-merger financial statements with the SEC. Given how much work companies are already doing in the wake of a merger, keeping up with SEC regulations may not be top of mind. DFIN offers technical solutions for due diligence and the post-merger integration, include our core product, ActiveDisclosure. ActiveDisclosure supports team-based workflows and allows for XBRL tagging, for easier compliance and regulatory reporting.

In 2020, the SEC updated its rules regarding post-merger and acquisition financing reporting for the first time in 30 years. The new rules are in effect as of January 2021. Our personnel can guide you through the latest changes as well as all required post-merger and acquisition financial performance analysis. You’re free to concentrate on the post-merger process to help ensure long-term success of the venture.