MERGER INTEGRATION – MANAGING RISKS AND DRIVING COOPERATION
RC: How would you describe the general awareness among acquirers of the risks associated with the merger integration process? Do you believe many fail to pay enough attention to this aspect of the transaction process?
Collins: The level of appreciation for the complexities posed by post-merger integration has grown in recent years but still has room for improvement. There is an oft-cited statistic that over 50 percent of M&A deals fail to deliver expected shareholder value, and many dealmakers now cite breakdowns and inefficiencies during the integration phase of the deal lifecycle as one of the key reasons why. Overall, the highly complex ‘mega-deals’ generally receive the proper amount of preparation but it is alarming that many transactions that fall outside of this scope, which are the majority, lack sufficient advanced planning. Just because a deal is ‘small’ does not mean it doesn’t carry a significant amount of risk and potential integration complexity.
RC: Could you highlight some of the common risks associated with merger integration? To what extent can it determine the success or failure of a merger?
Collins: There is a lengthy list of risks associated with the merger integration process but not all are created equal. Some are extremely tactical, such as defining sales coverage models, transferring sensitive files to the acquirer or target, reconciling product or service pricing discrepancies or reducing duplicative administrative functions. Other risks are considered a bit ‘softer’ in nature, such as assimilating corporate cultures – which is clearly important but is not quite as measureable or defined within the financial analyses. Issues related to either subset of risks can lead to underperformance, and need to be mitigated. Having a developed integration plan defined, the right people in place and a set of supporting systems can determine whether a deal is considered a success or a failure.
Jan-Mar 2017 Issue