Realising post-deal potential: it’s all in the synergy

David Heathcote, Head of Deal Advisory
David Heathcote, Head of Deal Advisory

Buying another business can reinvigorate a company, and disruptive mergers and acquisitions are emerging as the quickest route to this end. Where traditional M&A may look to incorporate one organisation into another’s traditional line of business, disruptive M&A deals provide an exciting platform through which companies may completely redirect the ship.

Mergers and acquisitions should be designed to advantage all involved, yet most fail to realise the promised synergy benefits. At times organisations are too ambitious in their synergy targets, whilst other deals fail simply because of poor execution. In order to succeed, both parties must understand their values, as individual entities and a unified organisation.

The breakdown in M&A often results because of overly ambitious synergy targets, although this is usually less to do with poor initial calculations and more a result of underestimating just how complex the process of integration is. Companies commonly misjudge the enormity of the task. Integration requires difficult decisions, made quickly during a period of skepticism and uncertainty; all the while business is expected to continue as usual. It’s tricky business.

The benefits of integration are worth working for, despite these challenges there are a number of key steps organisations can take to increase the likelihood of success. Companies need to resource the entire program well, investing appropriately, remembering their core values and crediting their people with the ability to adapt to change. Early mobilisation is also important. A good target is to have an integration blueprint ready before it is time to put pen to paper on a deal.

Communication is also critical in the process. People are far more inclined to react favourably to change if they are kept informed and have a better understanding of the desired outcome. The need to keep a workforce informed about the integration process with clarity and empathy is paramount. Organisations do not change because of new systems, processes or structures, they change because the people within them change; it is always worth listening to their opinions.

It is also worth investing the time and organisational muscle in developing a robust project management office (PMO). It will bring rigour to the process, providing the diligence that will prevent bits and pieces falling through the cracks. In an integration, it is important not to confuse ‘must haves’ with ‘nice to haves’; a PMO will, along with the project sponsor and integration director, ensure that these are prioritised correctly.

All of these systems play their part in ensuring the smoothest possible transition and settling period. It is crucial to keep in mind the previous cultures of both organisations, especially if they come from different geographies. Cultural sensitivity needs to permeate the integration process at every level, on both sides.

There is little doubt that M&A deals are increasingly difficult to pull off in industries characterised by continued consolidation. Moreover, valuing businesses in the context of today’s globalised world is an enormous challenge. But it isn’t all doom and gloom, there is real value to be gained from well-planned integrations and the key to achieving one remains absolute rigour. Approaching integration with a detailed plan, an alertness to the inevitable challenges and realism about how they should be tackled will facilitate the best chance of success.

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