Post-merger integration

Post-merger integration mistakes

According to most surveys, including those from BusinessWeek and McKinsey quarterly 2/3 of all mergers and acquisitions fail to meet their objectives due to cultural clashes. In Gugin we have spent thousands of hours and a lot of money researching the reason behind this and develop services that help bring down that ratio. But no matter how good we become at facilitating cultural- and organisational integration there are still some factors we can not control and in the early stages of a merger or a take-over there are often made decisions that are counterproductive to a successful integration.

In this short article I will reveal some of the reasons why some integration processes go wrong despite all the best intentions from the parties involved.

There is not always a clear strategic choice behind a merger or an acquisition.

Sometimes a company is forced into that situation because of a crisis caused by changes in the external environment. Sometimes companies are forced to buy other companies because of pressure from the shareholders who don’t want their investment to posses too much cash. Acquisitions based on these motivaters are almost always going to fail, simply because no one running the daily businesses really don’t see the point, so they have no motivation to make it successful.

The investment banks are never on your side

It is often the norm that a company contact an investment bank when they are looking for a company to merge with or acquire. The investment bank will conduct a due diligence to document whether a possible merger or acquisition will be a good or a bad solution. They will look at the financial performance, the market position, legal obligations, goodwill and almost anything else you can squeeze into a spreadsheet. What they don’t look at is people’s motivation to go to work or people’s motivation to buy that company’s products or services. The investment banks will tell you it can not be measured. But that is simply not true. So when an investment bank is proposing you a candidate to merge with or buy, don’t be so sure they are on your side. You might have a dream about strengthen your company, create better products, get access to new markets. But the investment banks are only interested in getting a signature on a deal, so that they can get their commission. I know that for a fact because some of these investment banks have been completely honest with me when I on behalf of Gugin have approached them and suggested that we in addition on the due diligence that they do a cultural due diligence. The purpose of the cultural due diligence is to find out how well two companies for together culturally and before that what are the cultural strengths and weaknesses of your own company. When we have proposed collaboration with the investment banks, some of them told os bluntly that their only aim was to close the deal and they honestly didn’t care whether the transaction was long-term sustainable. Having Gugin on board would only prolong the decision process and in some cases lead to a no-go recommendation, which is bad for business if you are an investment bank on a commission paid out when the deal is signed.

The post-merger integration happens by itself

When Gugin is invited to facilitate the post-merger integration process, we almost always experience different levels of excitement depending on where we look in the organisation. The board of directors and senior executives are usually exited because they have a vision that can become a reality and often they have a substantial financial incentive to be exited too.

The middle managers are sceptical, sometimes hostile because they don’t how their position in the hierarchy is going to change, so they start spending all their time protecting their powerbase and position in the organisation. When they are together with the senior executives they praise the merger or acquisition but when they are with their teams they are on a political campaign to prefare for a fight.

The employees don’t care as much as the middle managers, but the most valuable employees will start scanning the market, become more active on LinkedIn, go to more professional conferences where the networking opportunities are good.

All this happens because a plan for the integration process isn’t considered from the very beginning. If Gugin comes on board very early in the process we can help figure out if the merger or acquisition is a good idea at all. What is the point merging with another company if your best employees and the majority of your customers leave you? And together we develop a plan for the integration process so people don’t end up unsecure about the future and which way the company is heading.

You also need someone from outside to facilitate the post-merger integration process, so that you can focus on what you do best – running your business.

One of the important things we help you decide is how deep do you want the integration to be. Do you acquire the company and more or less let it be or do you want a complete organisational and cultural integration? We help you make the right choice.

And no; the post-merger integration process doesn’t happen by itself, but we lose focus on it over time and leave back a fragmented, ineffective organisation with frustrated imployees and dissatisfied customers. That is why you should let someone else facilitate the integration process, because if you lose focus on that process and don’t deliver what you have promised your stakeholders you loose both your customers, employees and shareholders

Read more here on how Gugin can work together with you on post-merger integration here:

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