Post-merger integration: strategies for effective tech, people and process alignment

Combining two businesses into one strong, cohesive entity is a long, intensive process, at least when it's handled correctly. While there may be some temptation to get the merger completed as quickly as possible, it's best to take a strategic and thought-out approach to combining people, processes and technology.

The key question to ask in post-merger integration is "Why." Why was the acquisition launched, and what business outcome is the organization aiming for? These early questions plant the seeds for integration planning and help the business stay focused on value creation throughout the process.

Companies that don't invest effort in post-merger integration can end up with wasteful operations, a divided workplace culture, and other lingering issues, weakening the combined business for years to come. While integration work is a challenge, it's one worth accepting.

What's the importance of post-merger integration?

Post-merger integration is a specialized set of practices and priorities that are called upon during very specific circumstances. It's worth noting that most companies lack preparation in this area and may underestimate just how demanding it will be to combine their operations with another business as part of a merger.

It's common for post-merger acquisition efforts to encounter various stumbling blocks for a variety of reasons, including:

• Initial M&A decisions that were misguided or executed without a clear path to value.
• An overall lack of effective change management practices within the organization.
• Inadequate involvement from leaders and too much delegation.

These and other issues can lead to mistakes that may reverberate through a company's operations for years to come, and as such it's worth focusing on strong post-merger integration practices to keep the company on the right track.

Taking a strategic approach to post-merger integration allows companies to address the areas of people, processes and technology in an intelligent and planned way, rather than having to make important decisions on the fly.

The impact of solid post-merger integration can entail the following effects in each of those functional areas:

• People: The resulting organization will have a blueprint for cultural integration, with clear roles for all employee groups, rather than an "us vs. them" mentality. Holding onto key talent from both the acquiring company and the purchased company hinges on creating a company culture where they can thrive.
• Processes: The business's processes will be standardized and reinforced through important integration activities: training sessions that mirror the orientation experience. Finding synergy and creating a standardized set of new processes demands its own section of the integration strategy.
• Technology: The company's technology will be vetted and chosen intelligently, neither decommissioning old systems too quickly nor letting parallel systems create data silos. Data integration, especially for key systems like enterprise resource planning (ERP) platforms, can provide unexpected stumbling blocks and demands a specific integration plan.

Such a strategic approach allows the combined business to make the most of all its resources. In some post-merger scenarios. Companies may feel forced into divestiture from projects, offices, key talent or whole departments that were generally healthy and could have led to value creation. When that occurs, it's often because there wasn't an adequate plan regarding how to use those components within the new structure.

Who is responsible for post-merger integration?

Even in the most tech-savvy organizations, the people working on a project have a greater impact than the digital tools or frameworks they use. In the case of post-merger integration, there should be a strong, high-ranking stakeholder calling the shots.

What makes an ideal leader for an M&A integration project? This person should be:

• High-ranking: If a merger leader has to answer to too many levels of bureaucracy, it can be hard for this individual to make quick, decisive choices. Therefore, the post-merger integration champion should be at or near the executive level, either in the C-suite or close to it.
• Well-resourced: The point person for a merger project shouldn't have to take on the burden alone. It's important to give this leader all the resources they need to succeed. This should include an integration team made up of dedicated staff reporting in and taking on different aspects of the integration process.
• Focused on M&A: Rather than making a leader split their time between post-merger integration and their everyday duties, the company should allow this individual to focus all their time and effort on integration. This isn't a waste of resources — properly handled M&A takes significant time, and there's value in having someone to keep it on track.

Appointing an integration team specifically to handle the execution of the integration plan isn't an unnecessary indulgence — it's simply the most direct way to give the process a chance to succeed. By giving these dedicated professionals the ability to establish a strategy and follow it through to completion, the business is showing its dedication to integration success.

How do you keep post-merger integration on track?

Taking a best-practices approach to post-merger integration is a wide-ranging concept that starts before the merger is finalized and extends for over a year as the two companies find the best use for their respective people, processes and technologies.

Specific practices to embrace include:

• Starting early: Pre-merger planning has an outsized effect on the readiness of a company for the complex processes that occur once the organization starts to combine its departments and tech stacks. By the time integration begins, the organization should understand the underlying business logic for the merger and have specific objectives to aim for.
• Roadmapping the process: The roadmap for an M&A project should have benchmarks to allow employees to measure the project's progress. The map shouldn't be too specific, however, because well-managed mergers happen on a long and flexible timeline, ranging from one year to as many as three when highly technical systems are involved.
• Prioritizing issues that can't wait: While M&A activity takes a long time, some areas should skip to the front of the queue. These prominently include security considerations — the combined company needs to measure its risk, liability and attack surface, as well as its new situation regarding technology licensing.
• Focusing on people: If employees go too long without receiving a grounding in the new company culture, they may struggle to redefine themselves as part of a unified team. This means the business should set up cultural integration via orientation sessions shortly after the merger is finalized, mirroring the new-employee welcome process.
• Being patient with technology: Organizations shouldn't be too hasty about combining their tech stacks. When the business has redundant systems, it's tempting to combine them quickly, but it's often worth waiting to determine the relative return on investment of choosing one or the other — or letting the existing systems continue running in parallel.
• Following change management principles: While mergers are unique events, they're also highly compatible with the overall practices of change management. Organizations that have well-developed systems for guiding their employees and technologies through overall change will be well-prepared to manage a value-focused merger.

There is no one-size-fits-all approach to M&A management. Being too committed to a specific point of view when chasing cost savings — for example, laying off a whole team, closing a specific office or replacing an entire tech stack — can harm the combined entity's chances for integration success.

Having a strong and well-informed team handling the post-merger integration process allows the company to draw up a plan focused on value and business objectives and then follow through.

What are some specific approaches to post-merger integration?

One of the best ways to be effective at M&A activity is to run a business that is flexible and adaptable in its everyday operations. Organizations with a strong ability to manage change, integrate new systems and onboard employees are naturally prepared for the strain of post-merger integration.

Even the best-prepared organization, however, may benefit from working with outside experts to handle the specific stressors and requirements of the post-merger integration process. This is especially true when a merger brings the need to adopt entirely new working arrangements.

For instance, some companies have always operated from one office, only taking on distributed work models because of a merger. Managing this culture shock — and taking on the new practices needed to succeed — is a great case for engagement with an expert third party.

There are two major models for collaboration between these outside experts and a company's internal team:

• The organization's own stakeholders lead the post-merger integration process, drawing on the third party for support, consulting and expertise to fill in knowledge gaps and complete the M&A operation smoothly.
• The third party becomes the leader, guiding the post-merger integration and engaging with internal personnel to ensure it's creating the kind of consolidated company culture that fits the organization's vision.

No matter which group is in control of the post-merger integration process, a successful merger needs to ensure that the same internal staff members keep working on the project from pre-merger to completion. This continuity of personnel ensures knowledge retention.

Ready to commit to effective post-merger integration?

If you intend to engage in any kind of M&A transaction, it's worth planning out the operation in every detail. This planning should always come back to the "why" that motivated the purchase, and can inform all your objectives.

Working with Transcenda can empower you for successful integration, during and after the transaction is finalized. Our experts have a long history of working with companies of all sizes, across a range of industries. This experience has given the Transcenda team a strong list of best practices to draw on, as well as skills we can pass on to your team.

Want to see how Transcenda can assist with post-merger integration? Read our case studies or contact us today.