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Some views on merger integration

I posted this picture on LinkedIn a week ago together with some open questions in hope for some engagement on the interesting subject of merger integration - one of the most challenging and critical phases related to M&A. It seemed to resonate well with the views of those who dared to comment or like. We had a few good comment exchanges and now I’d like to summarize the thinking behind the picture, including the views provided. If you have some other views to add, you´re welcome to comment - If you dare:)

Take a good look at the picture and read on - 6 short blocks.

1. Respect - Company A and 1

Respect is the foundation for a successful merger. Respect for both of the merging entities, their respective history, culture and strengths. Respect for the people working within these entities and their stakeholders. In a merger situation many may feel vulnerable due to uncertainty about their own future. Everything they were in control of up until the deal was announced is wiped out of control. This concerns part of the leaders as well as everyone on board. What will happen next? What role will I have? Will I have a job?

Leaders in charge should show respect by being transparent and truthful. If there is bad news to tell, then tell the bad news. Delaying what people fear is coming, only makes things worse. Transparency helps in building trust and trust is required for the integration to stand a chance of success. Respect is pictured by the naming of the merging entities as Company 1 and A. They are equals in terms of deserved respect, irrespective of size and other factors.

2. Organization - Gradual transformation

Launching the new organization early is without doubt very important. The difficult choices and decisions should be made promptly in order to minimize the period of uncertainty. A genuine leadership team is ideally formed with representatives from both of the merging entities. It should be realized that the merged entity is a new chapter and that holding on to past roles and positions for the wrong reasons will only hinder the integration. Integration streams need to be decided and assigned to the right individuals and teams while ensuring that they have sufficient capacity for a lengthy process.

While speed in establishing the new organization is of essence, it is equally important to understand that a functional organization is not the same as an organization chart. The real organization is the people, their relations and the way they interact - it can look quite different compared to the chart. A functional organization takes time to form. Organization is described by the square area transforming from two entities into one powered by the integration streams.

3. Integration streams - 1+1>2

Integration streams are the focus areas through which the merged entity aims to become more than 1+1. The most important is value for customers. Are there any concrete or potential benefits for customers of the joined entities? The best way to find out is to involve customers in defining the added value. This should preferably spearhead the integration work. How can you build a synergistic offering without knowing what your customers value? The other streams typically focus on synergies aiming at scale benefits and efficiency gains - important as well - and challenging as they often result in fewer people. The longer it takes to reach these synergies, the longer the organization will live in uncertainty and generally perform below potential.

How then, should the streams be run? Especially in larger companies the risk for extensive analyses and endless internal workshops is evident, while most employees are left more or less in the dark. Detailed spreadsheets, long power point decks and overall abstraction won't make the integration real. Rather, a clear direction based on natural synergies, supported by a road map (incl. targeted level of integration, phases, milestones and KPI’s) and a prioritized project portfolio that is well anchored in reality, provides the needed support for efficient execution. The focus should be on near term activities involving people. People need to be engaged and empowered to take small steps in the right direction. The more small steps taken, the closer to real success the integration progresses.

4. Leadership - Serving the organization

I like to think of leadership as the art of creating, releasing and guiding energy. Leaders who engage, empower and enable people, create momentum by expanding leadership throughout the organization. They understand that everyone has something to contribute in crafting their own and the common future. They drive the culture by a meaningful purpose, a clear vision and positive values. They do that through consistent multi-channel communication and by engaging in continuous dialogue within and outside the organization. They understand that listening is a key to good leadership.

The circle, or wheel of leadership keeps the integration process together and moving persistently forward toward the targets. This process largely defines the pace, persistence, long term sustainability and success of the integration. Whereas the integration process as such can end as a project, the wheel of leadership cannot stop, ever. It can only adapt to the different phases of the business life cycle. Leadership is pictured by the semi-transparent orange circle stretching also outside the organization. The more solid it is, the better. The best judges of that, are the people of the organization, whereas the Board of Directors has the final word. You know what I mean:)

5. The world outside - never forget it

The focus easily turns inwards during merger integration, which may lead to external risks going un-noticed. Customers may feel sub-served while competitors may cease the moment. Leaders need to keep their senses open to what’s happening in the outside world. Business must continue to deliver value to customers and live up to expectations from all stakeholders, despite the integration phase. The outside world is pictured by the background - semi-cloudy skies. Keeping an eye on how clouds form, build up and move as well as acting pro-actively are as important as the other parts.

6. The target - a sustainable and successful company

After all is done, the merged company should be in a good position and provide more value to all stakeholders. It should have gained new competitive advantages and/or increased competitiveness, depending on the case, and thus have a stronger market position than before the merger. The process of integration should have refined and strengthened the organization in many ways, providing for a strong foundation for future growth, both as a business and as a platform for people to develop. The target is pictured by the naming as OneCo and the expanding dark triangle. Nothing can stop it from growing further.

If that was the thinking behind the high-level picture, what else would you like to add to ensure successful merger integration? Any fresh arguments are also very welcome.


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