Post-merger integration

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Post-merger integration or PMI is a complex process of combining and rearranging businesses to materialize potential efficiencies and synergies that usually motivate mergers and acquisitions. The PMI is a critical aspect of mergers; it involves combining the original socio-technical systems of the merging organizations into one newly combined system.

Overview[edit]

The process of combining two or more organizations into a single organization involves several organizational systems, such as assets, people, resources, tasks, and the supporting information technology.[1] The process of combining these systems is known as 'integration'. Integration Planning is one of the most challenging areas to address pre-close during a merger or acquisition.[2][3] Even though culture clash between companies can cause integration problems, only 4% of the executives in a survey by Pritchett, LP reported that their organizations include culture-specific questions in their due diligence checklists.[4] Culture specific due diligence may include cultural screening and creating a cultural profile of the target firm. GE Capital conducts a cultural assesment of prospective candidates against metrics such as trust in existing managers, language barriers, and operating processes to then facilitate a culture work out session between both sides. Lee Marks, Mitchell; H. Mirvis, Philip (December 2011). "A framework for the human resource role in managing culture in Mergers and Acquisitions". Human Resource Management. 50: 859–877.

The integration management office, or IMO, manages core functions of the integration effort and provides structure for integration delivery.[5] In a survey by Global PMI Partners of 143 M&A executives, 67% of respondents incorporate IMOs during an acquisition on at least half of their initiatives in a cross-border setting.[6]

Integration often requires a daunting degree of effort and coordination, but when done well, companies may deliver as much as 6 to 12 percentage points higher total returns to shareholders (TRS) than those that don’t.[7]

Organizational lifecycle[edit]

Integration fits within an organizational lifecycle or specific business mergers and acquisitions cycle where businesses buy, integrate, then dispose of businesses:

  • Definition of vision & strategy
  • Selection of growth method: organic vs inorganic
  • Target identification
  • Pre-deal evaluation & due diligence
  • Negotiation & deal completion
  • Post-merger integration
  • Acquisition integration
  • Ongoing improvement
  • Disposal

See also[edit]

References[edit]

  1. ^ Anthony F., Buono; Bowditch, James L. (1989). The human side of mergers and acquisitions: Managing collisions between people, cultures, and organizations. San Francisco: Jossey-Bass Publishers. ISBN 1-55542-135-0.
  2. ^ "Merger Integration Due Diligence". Dr. K.M.Popp. Retrieved 2014-07-21.
  3. ^ M&A Transaction Survey of 50 executive M&A respondents (2013); ModalMinds Inc.; http://modalminds.com/modality/ma-transaction-survey-results/
  4. ^ Pritchett LP (2018), Corporate Culture: The "X Factor" in Merger Success and Failure; https://www.mergerintegration.com/corporate-culture-x-factor-merger-success-and-failure
  5. ^ Hofmeyer, Stefan; Whitaker, Scott C.; et al. (2016). Cross-Border Mergers and Acquisitions. Hoboken, New Jersey: John Wiley & Sons, Inc. ISBN 978-1-119-04223-5.
  6. ^ Global PMI Partners, Cross-Border M&A Integration Survey, November 2015; http://www.gpmip.com
  7. ^ Doherty, Rebecca; Engert, Oliver; West, Andy. "A Billion Dollar Successful Separation". Transaction Advisors. ISSN 2329-9134.

External links[edit]