Acquiring another company is a risky business: only about one in three acquisitions actually achieves its stated pre-merger goals. Yet a properly planned and implemented acquisition strategy can provide a route to profitable growth for companies of all sizes. Crucial to a successful outcome is the way in which the post-acquisition integration of the acquiring company and the acquisition target is handled.
This article lists nine key points to consider when planning an acquisition or merger.
A checklist for successful post-acquisition integration
- Differences in the corporate cultures of the acquirer and the acquired company might undermine the success of the acquisition deal.
- Managers should not underestimate the co-ordination problems associated with a merger or acquisition.
- The acquiring company should investigate different options for an appropriate organisational design for the acquisition target, rather than imposing its own structure. Replacement of leadership following an acquisition has a negative effect on performance. Post-acquisition integration has a positive effect on performance.
- Issues around control should be carefully managed after a merger or acquisition. Centralised control, with a removal of autonomy for the acquisition target's management team, might demotivate and result in a poorly performing organisation.
- The acquirer should carefully design appropriate incentives for the acquired organisation's management team.
- While there tends to be a high rate of exit among key employees of the acquired company after an acquisition, previous compensation arrangements affect how any new arrangements are perceived.
- Standardising pay scales, work rules and brands may not always be the best post-acquisition strategy.
- Worker dissatisfaction can be very damaging after a merger or acquisition, especially within service industries or where key employees have a high degree of bargaining power.
- In the realm of mergers and acquisitions, it is not so much what you buy but what you do after you've bought it, and how well you do it, that matters in distinguishing failure from success.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
