By Patrick Heinemann and Jörg Delhaes

When the median volume of M&A transactions tips the scales at USD 580 million (2023), calling post-merger integration (PMI) a complex matter is quite the understatement. Keeping both businesses running while fusing two entities into one with a single, shared vision and mission is no easy task.

Why PMI projects fail

Drawing on analogies from the world of sound, a new Roland Berger study likens the process of getting two companies to ‘play nicely together’ to instruments that – if they are out of time and out of tune with each other – make a discordant din rather than melodious music.

The study identifies three main reasons why PMI projects often fail, but also highlights three key issues that must be borne in mind throughout the process of integration:

Solutions for success

Building on this understanding – and drawing on decades of experience walking clients through successful post-merger integration – the study highlights ten success factors that have repeatedly shown themselves to be key in getting the job done and maximizing the use of synergies. The first three address the need for sustainable value creation from the word go:

#1 A clear strategic rationale
Post-merger integration should help the new entity move toward its combined strategy. But this presupposes that a clear strategy actually exists!

#2 A focus on business continuity
While reaching for this strategic vision, it is crucial to keep both sides of the business running. The study examines the challenges this presents to managers who are often caught between two stools.

#3 Accelerated synergy realization
Ideally, the whole should deliver more than the sum of its parts. Realistic synergy targets must therefore be hammered out, communicated and implemented from the outset.

Three more success factors are all about ensuring rigorous governance of the PMI project from start to finish:

#4 A clear set of integration principles and a detailed master plan
Breaking a huge merger down into actionable packages has to be done in a systematic and coordinated manner. All the instruments need to be playing the same tune.

#5 Dedicated capabilities and resources
The right people need to be put in the right places with sufficient resources to complete the process of integration.

#6 An empowered Integration Management Office (IMO)
Importantly, the IMO must be able to override the wishes of individual units if they veer off course and get out of sync with other parts of the organization.

The last four key success factors speak to an issue that, though often seriously neglected, often turns out to be the most important aspect of all: the integration of people and two distinct corporate cultures:

#7 Strong and aligned leadership
People follow their leaders, so the leaders need to know where they are going. Crucially, they must also speak with one voice.

#8 Smart communication
Telling people what comes next, valuing their contributions, keeping stakeholders informed: Good communication keeps the mood upbeat and the machinery of integration well oiled.

#9 Successful cultural integration
A clash of cultures that is not properly managed can spell doom for even the most promising merger.

#10 Retention of talent and selection of deal champions
Key talents are not soloists, but the other ‘musicians’ follow their influence and play to the same tune. Equally, talented people who are given a key role more clearly see (and embrace) their own future in the new company that is emerging.

The way forward

To prevent what should be a harmonious duo from dissolving into a value-destroying duel, all these factors have their part to play in the process of post-merger integration. Go here to access the detailed Roland Berger study and learn how your merger, too, can be a symphony of successful synergies rather than a discordant dirge of squandered potential.