Published: 21 Dec 2011
Last Updated: 09 Oct 2013
We’ve all watched disastrous mergers: the coming together of Time Warner and AOL is widely regarded as one of the worst mergers in history. So poorly executed was the integration that at one point, it led to a $200billion loss in stock-market value and a $54billion write-down in the worth of the combined company's assets. Time Warner and AOL reached an end to their journey a couple of years ago, de-merging again. Few would argue that they arrived at the destination they set out for.
But it’s not just the large, high profile deals that fail. It’s well documented that over 50% of mergers fail to deliver the business benefits promised to investors.
So what can be done to ensure that plans to merge are not left to run wild and end up costing billions in lost revenue and stock value?
Dedicate resources
Many fail to do this, but dedicating the resources and expertise to making sure the benefits of the merger are realised is critical. Almost as soon as the deal is signed, a dedicated integration team should be established reporting directly to the board with the authority and accountability for making things happen.
Have a clear direction
Next; the integration team must pick the fastest, least complex approach or strategy to reaching its goals. Sounds simple, but this factor is so often the root cause of so many integration failures.
Integration versus optimisation should be no contest
The combined company must move quickly to the simplest, single operating model and scale it up to ensure it can cope with the volume of the newly combined business. This is not the time for fixing every operational issue en route or pandering to internal pressures. It’s a time to look at ways to take complexity (and change) out of the plan not add unnecessary change to it!
Don't strive for planning perfection
Aiming to create an integration plan that answers all of the questions before the organisation moves to execution will just result in integration delays and prolonged debate. No matter how much planning you do, there are some obstacles you’ll never identify. The art to integration is how the organisation navigates through these points of pain as the onion skin is peeled back layer by layer.
Manage the market and communicate like mad
The integration team should also ensure that there are clear and transparent communications to both companies’ customers, staff and other stakeholders. Across all of these groups, three things must be constantly communicated: the logic of the acquisition, the integration plan and its progress.
Robust governance
Finally, a robust governance framework needs to be implemented so there’s no doubt about roles, responsibilities, reporting lines and decision making throughout the integration programme.
The cost of a botched integration can be severe. Doing the deal is only a part of the battle. Driving the integration programme is equally important if the benefits shouted about in the deal are to be realised.
- Pip Peel is Founder and VP at PIPC, a global management consultancy which has delivered some of the largest post merger integrations in corporate history.
But it’s not just the large, high profile deals that fail. It’s well documented that over 50% of mergers fail to deliver the business benefits promised to investors.
So what can be done to ensure that plans to merge are not left to run wild and end up costing billions in lost revenue and stock value?
Dedicate resources
Many fail to do this, but dedicating the resources and expertise to making sure the benefits of the merger are realised is critical. Almost as soon as the deal is signed, a dedicated integration team should be established reporting directly to the board with the authority and accountability for making things happen.
Have a clear direction
Next; the integration team must pick the fastest, least complex approach or strategy to reaching its goals. Sounds simple, but this factor is so often the root cause of so many integration failures.
Integration versus optimisation should be no contest
The combined company must move quickly to the simplest, single operating model and scale it up to ensure it can cope with the volume of the newly combined business. This is not the time for fixing every operational issue en route or pandering to internal pressures. It’s a time to look at ways to take complexity (and change) out of the plan not add unnecessary change to it!
Don't strive for planning perfection
Aiming to create an integration plan that answers all of the questions before the organisation moves to execution will just result in integration delays and prolonged debate. No matter how much planning you do, there are some obstacles you’ll never identify. The art to integration is how the organisation navigates through these points of pain as the onion skin is peeled back layer by layer.
Manage the market and communicate like mad
The integration team should also ensure that there are clear and transparent communications to both companies’ customers, staff and other stakeholders. Across all of these groups, three things must be constantly communicated: the logic of the acquisition, the integration plan and its progress.
Robust governance
Finally, a robust governance framework needs to be implemented so there’s no doubt about roles, responsibilities, reporting lines and decision making throughout the integration programme.
The cost of a botched integration can be severe. Doing the deal is only a part of the battle. Driving the integration programme is equally important if the benefits shouted about in the deal are to be realised.
- Pip Peel is Founder and VP at PIPC, a global management consultancy which has delivered some of the largest post merger integrations in corporate history.
