Post-merger integration
Post-merger integration or PMI is the process of combining and rearranging businesses to materialize potential efficiencies and synergies that usually motivate mergers and acquisitions. The PMI is a critical aspect of mergers; it involves combining the original logistical-socio-technical systems of the merging organizations into one newly combined system.
Overview
[edit]The process of combining two or more organizations into a single organization involves several organizational systems, such as assets, people, resources, tasks, and the supporting information technology.[1] The process of combining these systems is known as 'integration'. Integration Planning is one of the most challenging areas to address pre-close during a merger or acquisition. Even though culture clash between companies can cause integration problems, only 4% of the executives in a survey by Pritchett, LP reported that their organizations include culture-specific questions in their due diligence checklists.[2] Culture-specific due diligence may include cultural screening and creating a cultural profile of the target firm. GE Capital conducts a cultural assessment of prospective candidates against metrics such as trust in existing managers, language barriers, and operating processes to then facilitate a culture work out session between both sides.[3]
An example of a typical structure for an integration consists of three layers: a steering committee, an integration management office (led by an integration manager) and a variety of additional teams organized by function (i.e. sales, human resources, finance, and information technology, etc.) and/or by business unit, product line, process, or geographic location.[4]
More communication to employees is usually necessary during post merger integrations than during day-to-day operations.[5] Fortunately, many of the questions from employees can be anticipated.[6]
Achieving successes early in an integration can help build confidence in a deal and quiet skeptics.[7]
Common problems that may be encountered during post merger integrations include resistance to change, divided loyalties, issues with employee trust in leaders, blurred roles and responsibilities, unclear reporting relationships, communication tangles, job insecurity, unusual employee turnover, and infighting. [8][9]
Organizational lifecycle
[edit]Integration fits within an organizational lifecycle or specific business mergers and acquisitions cycle where businesses buy, integrate, then dispose of businesses:
- Definition of vision & strategy
- Selection of growth method: organic vs inorganic
- Target identification
- Pre-deal evaluation & due diligence
- Negotiation & deal completion
- Post-merger integration
- Acquisition integration
- Ongoing improvement
- Disposal
See also
[edit]- Mergers & acquisitions
- Business acquisition
- Program management
- Project management
- Change management
- Corporate finance
- Management due diligence
References
[edit]- ^ Anthony F., Buono; Bowditch, James L. (1989). The human side of mergers and acquisitions: Managing collisions between people, cultures, and organizations. San Francisco: Jossey-Bass Publishers. ISBN 1-55542-135-0.[pages needed]
- ^ "Corporate Culture: The "X Factor" in Merger Success and Failure". Mergerintegration.com. Retrieved 26 June 2019.
- ^ Lee Marks, Mitchell; H. Mirvis, Philip (December 2011). "A framework for the human resource role in managing culture in Mergers and Acquisitions". Human Resource Management. 50 (6): 859–877. doi:10.1002/hrm.20445.
- ^ "The 5 Critical Elements of an M&A Integration Plan". Mergerintegration.com. Retrieved 26 June 2019.
- ^ "Top 10 Reasons Why More Employee Communication Is Necessary When Merging Companies". Mergerintegration.com. Retrieved 26 June 2019.
- ^ "M&A Common Questions from Employees, Customers, and Media". Mergerintegration.com. Retrieved 26 June 2019.
- ^ "Engineer Early Success in Your Merger". Mergerintegration.com. Retrieved 26 June 2019.
- ^ Price, Pritchett; Pound, Ron (2018). Smart Moves: A Crash Course on Merger Integration Management (PDF). Dallas, Texas: Pritchett, LP. p. 8. ISBN 978-0944002032.
- ^ Lipponen, Jukka; Kaltiainen, Janne; Van Der Werff, Lisa; Steffens, Niklas K. (2020). "Merger-specific trust cues in the development of trust in new supervisors during an organizational merger: A naturally occurring quasi-experiment". The Leadership Quarterly. 31 (4): 101365. doi:10.1016/j.leaqua.2019.101365. S2CID 212957211.
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