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 shareholder‟s 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 staff‟s 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
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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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