Entering foreign markets and reaching new customers, realising cost savings or extending product portfolio: The rationale for mergers and acquisitions vary from deal to deal. In some cases, deal makers are able to reach their expected synergies quickly. Other mergers and acquisitions will not add the value the deal makers were hoping for. What are the main reasons why some deals are sustainably successful while others fail to meet expectations?
That was the question we wanted to answer with our recently published analysis “Success factors in post-merger integration (PMI). “ The study concludes that successful deal makers excel in four areas of the PMI process:
– achieving synergies,
– completing the integration within an ambitious timeframe,
– successfully managing culture and change, and
– implementing strong project governance.
Synergies are key
Synergies are a key to success and a necessary precondition to creating value with a merger or acquisition. Successful deal makers tend to integrate deeper than less successful acquirers. Businesses that are successful at integrating usually integrate not only support functions, but also core functions such as research and development.
Balance between speed and quality
Successful deal makers complete most of the integration within one year after closing. Businesses managing a speedy integration will benefit from the positive effects of a merger much sooner, enabling them to quickly return to daily business. The challenge lies with finding the optimum balance between the speed and quality of the integration. Too speedy an integration is risky: businesses may take uninformed decisions and overlook important aspects.
Actively managing culture and change
Establishing culture and change management during the integration process is one the most important success factors. Our survey indicates that companies that put culture and change management at the heart of their integration process perform considerably better. For the deal to be sustainably successful, businesses should focus on keeping key talents in the firm and engaging employees.
Strong project governance will pay off
The fourth success factor in post-merger integration is organizational: Businesses that implement strong project governance are usually more successful at integrating. Characteristics of a robust project governance include pragmatic guidelines for decision-making and on how to assign the right resources to the right activities at the right times. Strong project governance will speed up the integration process, offer support during cultural clashes as well as in managing other risks that can put integration success in danger.
The four dimensions are strongly interlinked
Our analysis shows that the four main success factors are strongly interlinked: Companies who perform well in one dimension also tend to excel in the other three. Businesses who take the four success factors identified in our research into account throughout the integration process have good chances to reach their expected goals – no matter whether these are to conquer new customer segments, to build expertise, or to cut costs.
Dr. Claude Fuhrer
Partner and M&A
Integration Leader PwC Switzerland
+41 79 312 80 82
Dr. Rosi Liem
Director and M&A
Integration Leader PwC Germany
+49 160 9953 24 02