A post-merger integration is not built overnight. In fact, it takes about ten years to acquire enough customers, establish a presence in other countries, create security equipment and acquire the necessary professional skills at the level of world standards.
The Best Way to Prepare Your Company for Post-Merger Integration
The decision to start a merger or absorption is akin to the decision to go on a long journey – it will be difficult and dangerous, but the daredevils will open up unprecedented prospects and they will receive one-of-a-kind knowledge. The merger process is never easy, each transaction is unique, and each needs a different course of action. We want to show how business leaders can identify the unique sources of value creation in each specific transaction and capitalize on all the new opportunities that will emerge from the merger.
Sometimes, due to numerous mergers, the appearance of entire industries, in particular, the chemical and pharmaceutical industries, changed. And, most interestingly, thanks to some mergers, such as Citibank – Travelers Group, new industries have actually sprung up. Our experience shows that in 70% of cases, potentially winning deals are ruined by the poor quality of preparation and implementation of integration.
Determining the purpose of the merger or acquisition and the benefits to the business:
- A clear definition of the strategy of an integrated organization.
- Determination of all expected benefits.
- Determining and presenting the expected effect of the merger.
- Selection of experienced specialists for organizing integration.
Post-merger integration solution is the best virtual data rooms platform, which provides an integrated suite of solutions to automate the resource discovery, security, and compliance lifecycle of IT infrastructure and enterprise resources, whether they are within the enterprise, within the network perimeter, or in the cloud. Data room delivery models can be easily and quickly deployed globally, resulting in faster adoption, wider adoption, and lower total cost of ownership than traditional on-premises enterprise software products. It provides businesses with actionable insights into potential vulnerabilities and malware in their IT infrastructure and helps them comply with internal policies and generally accepted standards.
What to Avoid in Post-Merger Integration?
- Erroneous determination of the transaction price (risk of overpayment or risk of loss of profit).
- Underestimation or overestimation of additional investments in the business (often this risk manifests itself with insufficient awareness of counterparties about the real state of affairs in business and/or with an unprepared or insufficiently detailed plan for business integration).
- Decrease in business capitalization after the transaction (this risk is inherent in publicly traded companies, due to changes in expectations regarding the prospects of the combined business).
- Increase in the tax burden of the business (mainly due to insufficient elaboration of the financial and legal scheme of the transaction).
- Loss of customer loyalty or customer churn after completion of the transaction and integration.
- Decrease in creditworthiness (associated with the risk of business enlargement and uncertainty in the effectiveness of post-integration processes).
- The impossibility of merging corporate cultures, and as a result, a decrease in the efficiency of personnel (often leads to the “flight” of personnel, a negative perception of changes, a decrease in the quality of communications and business processes, etc.).
- High costs for the integration of information systems.
- The emergence of claims of creditors to repay (possibly early) debt obligations.
- Obligation to buy back shares (shares, rights) from shareholders (owners) who do not agree with the reorganization of the business, etc.