Marriages & Mergers

July 22, 2008

Despite all the work that goes into planning a wedding and booking a nice honeymoon, anyone who has ever been married knows that the front end of the marriage is the easy part. The hard part, of course, is what comes after: Sharing bank accounts, working on house projects together, having children, and of course determining who gets the remote.

The same holds true in the M&A world, where the real work begins after the acquisition. Yet despite what is now widespread acknowledgement—and plenty of complaining—that post-merger integration is a tough nut to crack, there are still too few acquirors who make it a top priority. Of course, some of that may be due to the fact that companies don’t acquire businesses every day, and as such they may feel it can be delegated to a senior person in human resources, the chief operating officer or perhaps the person who runs business development.

But when you consider how many mergers fail, and when you weigh the high multiples that most acquirors have paid in the last few years, we ought to be seeing the more acquisitive companies—specifically private equity firms and active strategic acquirors—paying more attention to post-deal integration.

I’ve been covering M&A for a decade now, and I can literally count on one hand the number of people I’ve come across whose primary job is to worry about post-deal integration. (Just Google the term ‘vice president of post-merger integration’ and see how few results you get.) Too often, companies make the mistake of focusing almost solely on the ‘nuts and bolts’ systems issues, such as getting people onto the same software platforms (an IT project) and transferring health care coverage (an HR project), and neglect the arguably more important post-deal challenges like marrying two business cultures, communicating the vision of the combined entity and employee retention. Then there are those seemingly basic questions that frequently aren’t asked before the deal closes, like how long do you maintain two sets of books? And where does that data reside?

I can attest to some of these challenges first-hand, having worked for several years at a financial information company that made acquisitions on a regular basis, and before that going through the process of being acquired. I’ll never forget my first week at my new parent company’s office, waiting hours just to get a computer, and then a few days to get a working phone number. In fairness, both the IT and HR departments were overwhelmed, and it was clear they had no real game plan for post-deal integration.

I could go on and on, but by now you’re probably tiring of this rant. But if in fact we are in the midst a lengthy period of economic uncertainty, issues like post-merger integration arguably become even more important to the bottom line. That’s why we decided to launch this monthly e-newsletter, which will provide you valuable news, insights and commentary that will ultimately help you achieve post-deal integration effectively.

Going forward, please send all news to our contributing editor, Danielle Fugazy at Danielle.fugazy@sourcemedia.com, and if you don’t want to wait for the next e-newsletter please visit our web site at www.mergersunleashed.com.

As always, let me know your feedback.

Adam Reinebach, Publisher
Adam.reinebach@sourcemedia.com