Post Merger Integration (PMI)
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What, based on your expertise and experience, are the main pitfalls in PMI and how can these be avoided or overcome?
Miscommunication and inconsistent timelines are the major pitfalls that have thrown off integrations I’ve worked on in the past. This is mostly caused by a disconnect within leadership on the overall expectations of the integration.
Indeed, Erin, communications is the ‘bloodline’ and eventually it boils down, no pun intended, to people, again.
In my experience the most costly mistake I have seen is a delay in integrating the our systems and allowing the company that we acquired keep running on a separate platform. Reporting data and integrating the operations was next too impossible when going between two systems. inconsistent communication lead to costly mistakes and delays in the integration process.
Overcoming cultural gaps has been the biggest roadblock in my experience. This is a very important element of change management which often gets overlooked by the PMI teams.
In some projects, people are evaluated based on whether a target was purchased or not. To put it another way, whether PMI is successful or not is not taken into account. Therefore, there is no commitment from the people because whatever effort they put into, is it not valued. As we leaned in the course, it is important to value the work of people who are involved with PMI phase, so that they try to achieve the objectives of PMI.
Not addressing cultural integration is a big cause of a failed PMI. I’ve seen so many acquisitions where the target company is brought onto the acquiring company’s ERP or other technology (as well as H.R. integration of pay banding, etc.) and that is all they think they need to do to properly integrate the target company’s employees. It is key to create a NewCo culture or do the hard work of integrating the target company’s employees into the acquiring company’s culture.
I think overestimating synergie-value and underestimating the effort to ealize the integration is an absolute killer. Especially assuming that integration is just the final piece of the puzzle, while contrast, it’s just the beginning!
Indeed, Frederik! So long there is M&A, there will be over estimated or stated synergies … both are inseparable
Delays in the acquisition and communication. Once employees hear the acquisition is coming (or might be coming) the rumor mill can have a negative impact on moral.
Culture is also a big risk and anything we can do to identify if there is a culture fit during DD is best. I feel this is often overlooked by executives.
I would say lack of communication and synergies between management teams on both sides of the aisle (buying company and selling company).
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