Integration key to M&A success.

• Author: Wolf, Renita
• Position: Enterprise integration

Mergers and acquisitions have the potential to enhance shareholder value by creating cost, revenue, market power or intangible synergies, or a combination of these. Unfortunately, many corporations are not prepared to execute these incredibly complex transactions or to handle the problems that can occur almost anywhere during the prolonged M&A process.

In addition, mergers are by nature interventions in organizations that, if not properly managed, can create disruptions that may destroy a firm's intrinsic value. To achieve the anticipated value creation and to preserve this intrinsic value, the integration stage must be aggressively managed and management needs to be attentive to the achievement of each source of value.

It is at the integration stage where synergies are realized, and where earnings and cash flow come together to create value. Up to this stage, M&A focuses on theoretical forecasting exercises. During integration, executives must rebuild teams and develop capable, motivated people who are willing to drive the integration and the combined organization.

The process requires managing the assimilation of multiple cultures, innovating, building new teams and, in general, managing a complex change process. Integration-stage objectives include completing analytical activities not completed prior to the closing, acting to physically integrate the target and rebuilding the organization into a stronger, more competitive entity.

Integration-stage activities are complex and challenging, and to complicate matters more, each merger or acquisition is unique. However, there are activities that are common to most M&A integrations: demonstrating a committed and open-minded leadership; building teams and work units; focusing on financial and strategic objectives; remaining flexible; providing for capable and motivated people; assimilating new people and achieving cultural integration. Common integration challenges include: getting employees to embrace change; sharing information and effecting corporate understanding; effecting teamwork and cooperation; setting priorities; combining corporate functions and internal processes; and measuring results.

Organizations can mitigate these challenges and achieve value creation by using a best-in-class approach to M&A integration that includes the practice of project management, performance measurement and continuous improvement methodologies.

Project Management

A clearly defined project management...