Post Merger Integration: Understanding the Process

One of the most important aspects of a successful merger and acquisition (M&A) is how well the companies integrate into a unified entity. Aligning the distinct cultures of each company, the people who work and patronise them, and the systems they all rely on takes careful planning.

That’s why companies need to engage in integration scoping alongside their broader M&A due diligence and preparation activities. Below, we’ll explain the ins and outs of three major areas companies need to integrate and provide advice on how to approach each effectively during an M&A integration.

First, there’s the question of how to integrate your company and business cultures. Second, you need to think about how you integrate your new clientele or personnel. And finally there’s the question of how to integrate operational and financial processes.

We’ll unpack each of these integrations in this blog post.

Integrating Company and Business Cultures

One of the most obvious post merger challenges, especially in an international context, is the simple fact of cultural differences. Company cultures differ within given countries. Companies in different countries are also subject to broader, societal-level differences in business culture.

However, cultural differences can also be a background for surprising synergies between business cultures across countries—even ones considerably different from one another.

For example, consider the business culture in Germany and India. The countries differ widely in terms of languages, history, and traditions. However, both countries’ business cultures place a heavy emphasis on things like privacy, punctuality, order, and traditional, top-down hierarchy.

When planning or executing a merger, be sure to account for business and cultural integration considerations across both personnel and clientele. Establish a shared company culture that respects differences between people while clearly asserting company-specific expectations. Doing so may even help avoid potential M&A disputes.

Human resources support from a qualified Employer of Record (EOR) can facilitate cross-cultural exchange and alignment, especially in a workforce of international workers and contractors.

Integrating Personnel and Clientele

This stage is about integrating people, both inside and outside of the newly joint company, after the M&A deal. A successful post merger integration needs to align workers, contractors, and managers across the companies in order to have a successful integration. And it needs to ensure clients and customers stay with the merged entity, as well.

McKinsey outlines five practical actions managers can take to integrate workforces post-M&A:

• Establishing strong leadership and owning change management
• Communicating clearly about the company’s direction and priorities
• Modelling the kinds of work and communication expected post-merger
• Hard-wiring new operating models and systems into workers’ daily tasks
• Monitoring and adjusting over time as perceptions change or challenges arise

On the clientele side, M&A post merger integration comes down to sales, marketing, and branding. The way that customers and leads saw the companies before the merger influences how they’ll see the company after the M&A deal. In order to retain as many buyers as possible or globally expand into new markets, the company needs to carefully balance the old with the new.

In another study, McKinsey found that taking a careful, intentional approach to marketing and branding post-M&A integration could boost integration success dramatically. Across six “S” categories measured (story, segment, service, share, science, and scope), revenue capture increased by up to 100%.

The key for both internal and external integration post merger is facilitating clear lines of communication. Making it clear what the company is helps all stakeholders align with that.

Integrating Operational and Financial Systems

In addition to cultures and people, a successful M&A strategy should also join the systems and processes workers and managers use for day-to-day operations. In many cases, mergers result in consolidations across these, with acquired teams assuming the operations and logistics norms of the buying company.

Bain & Company has identified six key elements of successful systems and data integration post-M&A:

• Aligning the underlying thesis behind information technology (IT) systems
• Initiating and progressing through systems alignment as swiftly as possible
• Allocating resources and budgets appropriately
• Protecting digital agendas across newly joined workforces
• Adopting the best talent from both acquiring and acquired teams
• Reassessing overall IT needs, approach, and costs upon integration

Some of the most critical systems to prioritise in any M&A, but especially an international merger, are those that relate to the companies’ finances and bookkeeping practices.

Depending on the countries each company operates within, financial documentation may need to change to accommodate local accounting standards. Businesses in many countries use the International Financial Reporting Standards (IFRS). In many cases, public companies within a given country are required to use the IFRS. However, in other cases (i.e., the US, China, India), public companies are not allowed to use the IFRS for official accounting documentation.

What this all means in practice is that a post-merger integration strategy needs to approach systems and processes as carefully as it does cultures and people to ensure efficiency and legal compliance.