VERMEER TECHNOLOGIES

POSTMERGER INTEGRATION

Diverse motives complicate the process of postmerger integration as each motive

requires a different extent of integration
Past Failures:
Coca Colas acquisition of Wine
Spectrum; ultimately, had to
divest
Seagram Companys takeover
of St. Joe Minerals Corp.; saved
by Fluor Corporation
Exxon Inc.s acquisition of
Reliance Electric Company in
1981
Reasons of Failure:
Poor choice of merger partners
Inappropriate premerger
analysis
Lack of carefully designed
diversification strategy
Lack of integration between
merged firms

Legal &
Accounting
Integration
of
Procedures

Product Line
Integration
Integration of
Production
Technologies

Integration
of Physical
Assets

Sociocultura
l Integration

Functional
SBU Integration

Personnel
Transfer &
Organizational
Structure
Gaining
Commitment
Establishing
New Strategic
Leadership

It is important to determine the optimal degree of integration for different situations,

being wary of over- and under-integration

Acquisit Small
singleion
Motives unit firm
Increase
market share

Reduce
competition

Rapid growth

Physical
Integratio
n

Size & type of acquired

business
Functiona Divisionaliz Conglomer
l
ed
ate
Integrate
product
lines &
Functional
Areas

Integrate
only the
relevant
division

Integrate Emphasize
Procedura procedural
l Aspects &
sociocultur
al
integration
Integrate
physical
assets &

Postmerger Activities

Restrict
integration
to monitor

Do not
integrate
beyond

Decision Areas to Address

Relationships between the
parent and acquired businesses,
particularly reporting and
controlling procedures
Consolidation of functional
areas
Roles and involvement of the
acquired and acquiring firm
executives in the integration
activities
Extent of
centralization/autonomy to be
allowed
Compensation scales, employee
benefits, and personnel policies
Time frames for completing
integration and for changing

When to Ally and When to Acquire

MARKET CONDITION

RESOURCES

SYNERGIES
If

Consider this
Strategy.

If

Consider this
Strategy.

If

You want
sequential
synergies(one
company
completes tasks
and passes the
results to a
partner to do its
part)

Equity alliance( One

company invests in
an equity stake in
the other)

You must (combine

hard
resources( e.g.
manufacturing
plants) to get
desired
sysnergies)

Acquisition

You seek modular

synergies( Managi
ng resources
independently
and pooling
results for greater
profits.)

Non Equity alliance

You must combine

soft resources(e.g.
workforces) to get
synergies

Non Equity
alliance

The new
Non equity or
entity will face equity alliance
high market
uncertainty
( e.g. youre
unsure
whether
consumers or
regulators wil
embrace or
support it)

Acquisition

You want
reciprocal
synergies( both
firms execute
tasks through

Acquisition

You estimate being

saddled with
extensive
redundant
resources after
collaboration with
another

You ll have
rivals for
potential
partners

Consider this
Strategy.

Acquisition