Keys to Merger Success
Beating the Post-Acquisition Blues
There are key challenges that an executive leadership team
must address during the six critical months following an
acquisition. Action must be taken to cast the acquisition in
the best possible light among analysts, employees, and
shareholders. The environment changes yielding to uncertainty,
stress, even outright resistance. Assets need to be
integrated. And, decisions need to be made about whether to
invest in or rationalise various aspects of the merged
entity.
But what can you do to avoid the most common
pitfalls that plague the vast majority of mergers and
acquisitions today?
To begin with, it is important to understand a number of
assumptions going into any corporate combination. An
understanding of these simple assumptions can help you plan
where you're going and minimise some of the most disruptive
issues that can jeopardise the success of a deal.
First, executives need to keep in mind that, ultimately,
there is no such thing as a merger. Acquisition is a more
accurate term since inevitably one group will have more power
than the other. By accepting this early, you can effectively
set expectations and take measures that will ensure a smooth
transition.
Second, there is often an unrealistic expectation that once
done it can be undone. Executives need to recognise this will
not happen for a number of reasons; not the least of which is
the simple fact that regardless how hard you work to get back
to where you started, numerous factors change in the process
of going forward that make it impossible to go backwards.
Third, it is essential to remember is that most in the
merged company will feel intense anger when they see some
senior members leave having made large sums from the deal. The
executives who remain are the ones who have to deal with this
highly charged environment.
Fourth, in merger activity clarity, in every sphere, is
king. Employees appreciate it, the markets respect it, and
your shareholders expect it.
The State of Merger & Acquisition
While the pace and size of merger and acquisition
deals continue to swell, an undeniable fact remains unchanged:
the majority of mergers and acquisitions fail.
They fail to meet financial objectives. They fail to
increase shareholder value. And in one-third of the cases,
acquiring companies even fail to recoup the premium they pay
above market value for another company, according to Andersen
Consulting research.
More often than not, the culprit is poor execution. The
ability to integrate two companies quickly and seamlessly has
never been more important. The ability to capitalise on new
market opportunities, secure more customers and profits, and
attract investment community rewards hangs in the balance.
Companies lacking well-oiled integration capabilities risk
losing customers, employees, profits and market
capitalisation.
In contrast, some companies have developed the ability to
successfully and repeatedly merge and consolidate their
organisations -- their business operations and processes,
products and services, workforces, delivery channels,
technologies and cultures. In so doing, these companies
continuously improve their market capitalisation and meet
stakeholders' value expectations.
A Final Word
The incremental investment to build an acquisition engine can pay huge dividends.
An effective acquisition engine can significantly accelerate the integration process,
avoid costly missteps, and reduce employee and customer attrition. By better ensuing
success, it expands management's strategic options for growth.
(Extracts From: Andersen Consulting - http://www.ac.com)
