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Chapter 7

Post Merger Issues

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Integration in Mergers
Is all about make him like me

Is one of the most complex tasks in the process


Dealing with acquisitions of resources and liabilities and integration of various processes is critical for the survival of the new organization Has the potential to enhance shareholders value by creating cost

advantages, increase in revenue, increase in market power and/or


intangible synergies, etc.
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Integration in Mergers
Managing of multiple cultures Innovating Building new teams and Managing a complex change process.

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Activities common to M & A


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 teams Assimilating new people and achieving cultural integration

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Challenges faced in Integration Process

Getting employees to embrace change


Sharing information and effecting corporate understanding Effecting and cooperation Setting priorities Combining corporate functions and internal processes and

Measuring results

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Issues faced in Integration


Failure to align leadership, management, and supervisory practices with the new combination's core values Absence or lack of guidance about managing the "people factor" in order to maintain productivity and job satisfaction Failure to facilitate multi-directional knowledge transfer and organizational learning within the new combination Failure to redesign core work processes in a way that involves the employees Failure in the selection of appropriate personnel for crossborder and cross-unit assignments
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Issues faced in Integration


Lack of global competencies in key managers and supervisors Failure to re-conceptualize performance management and career

planning
Failure to align differing benefits and compensation packages Failure to facilitate the productivity of geographically dispersed "virtual" teams Slow decision making process Failure to provide coaching or mentoring to their subordinates
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Tools of Integration
Communication of the new strategic objectives and the new vision of the merged organization. Implementation of a new shared corporate culture and management culture Development of a new management structure for the new, larger organization especially overcoming of leadership problems in very large units Bringing together formerly separate units from both former organizations Harmonization of management compensation and management incentive systems
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Tools of Integration
Overcoming of language barriers and country specific cultural differences Overcoming of staffs suspiciousness of the other organization - Us vs. Them syndrome Filling of management positions Allocation of responsibilities Knowledge transfer among units that are to be integrated Maintenance of customer relationships during integration phase.

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Factors facilitating Integration


Mission and vision Ensured communication Selecting the right leader Welcoming new culture Teambuilding

Capturing value from different sources

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Identifying Sources of Value


Growth-oriented sources of value: New products, service offerings, markets, customer segments, and distribution channels Enhanced market presence and market capture Enhanced product development efficiency, i.e., leveraged R & D, internal best practices Combined technologies or capabilities Leveraged sales force Increased capture of the value chain
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Identifying Sources of Value


Efficiency-oriented sources of value: Integrated supply chain Leverage procurement volume (product and non-product) Production footprint optimization Facility optimization Vertical integration, de-integration Distribution channel optimization Sales force optimization Headquarters consolidation Support function consolidation like human resources, finance, IT, etc.
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Identifying Sources of Value

Other sources of value:


Financial value such as balance sheet items, taxes, etc. Optimized programs and policies e.g. benefits programs Rationalization and/or elimination of special programs, projects, etc. Additional alliances or relationships

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Strategies for Post merger Integration


Provide visible leadership from top management Ensure that the transition follows a structured and phased approach Ensure that goals are clearly defined and progress is tracked Manage change from the outset Use best practices to drive the creation of the new organization and its business processes Use cross-functional teams to drive merger Ensure that communication is well planned and coordinated Recognize that a merger is fraught with risk - avoid taking too much for granted
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Strategies for Post merger Integration


Focus on adding value to the enterprise, while avoiding those actions that can destroy it Avoid the compromises that result from playing to politics Concentrate on key employee retention Identify the leadership who will make the merger work Do not leave culture clashes left unchecked The "cultural migration" to the desired organizational behaviour is best achieved by visible example along with continuous reinforcement IT systems are frequently incompatible
Oxford University Press 2011. All rights reserved.
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Strategies for Post merger Integration


Recognize the importance of the company's customers and its own people Focus on the 80/20 rule Avoid over-analysis Excessive focus on perfection is generally ineffective Do not miss revenue enhancement opportunities that come through cross-selling and the development of new products and services for the expanded customer base.

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Factors influencing Post Merger Growth Strategies


Effective human resource strategies Social and cultural integration Reliable environment for employees and customers Well informed stakeholders Manage expectations Change agent Effective schedule Detailed market research

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Thank you!

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