Successful Post-Merger Integration: How To Realize Synergies

Mergers can be an excellent way for companies to grow and achieve more significant economies of scale.

However, without successful post-merger integration, the anticipated synergies may never materialize.

A merger combines two businesses, whereas an acquisition is when one company procures another. Some companies that unified their operations have more success after completing a merger.

Successful post-merger integration and realizing the synergies identified during the merger may be the key to their positive results. Companies looking to explore this as an option can benefit from the best practices discussed in this article prepared by DealRoom:

1. Develop a Detailed Integration Plan

A clear integration plan gives direction to all the parties involved.

When the companies announce their merger, they can implement this well-developed plan. It should outline the key objectives, timelines, and responsibilities of each team involved in the integration.

It should also identify any potential risks and mitigation strategies to address them properly and timely. That said, management can divide the plan into separate sections.

Firstly, all teams must be using the same systems, for example, in the call center. Using one central system makes the merger easier for clients and staff alike. If this isn't possible, consider outsourced call center services as an alternative.

Then, create a section for setting up an integration office. The staff in this office can mitigate any problems between the two companies, ensuring that the needs of both parties are met.

Communications should also be standardized. Prepare a generic statement for clients and teams about the merger to eliminate miscommunication or mixed messages.

The integration plan should include team tasks and deadlines. For each part of the merger integration, teams should have specific tasks with appropriate deadlines. Doing so will streamline the process, and no one will be left in the dark about their responsibilities.

Mergers will undoubtedly have integration issues early in the process. Fortunately, these can be less damaging when companies follow their integration plan. Companies can silence even the most substantial doubts by building momentum and completing the planned goals.

2. Establish Effective Communication

As briefly mentioned earlier, open and transparent communication channels are vital to successful post-merger integration. The leadership team should communicate the following to employees through an information memorandum:

The vision for the merged company
The benefits of the merger
The expectations for the integration

It can help reduce uncertainty and anxiety among employees and make them entirely on board with the merger. Management can consider adding the following aspects to their communication as well:

Make critical stakeholders known so the team can recognize their authority.
Distinguish milestones and possible trigger events and develop a communication plan.
Initiate two-way communications between all parties while remaining open to suggestions from their feedback.
Address all concerns from staff members in an informal manner that will reassure them.
Regularly update teams about the process and keep messages compelling and constant.
Communicate on the level of understanding of the other party.

Some consider communication the most important part of successful integrations. Thus, merging companies should place greater focus on this part of their strategy.

3. Identify the Various Synergies

Before finalizing the merger deal, companies can identify the expected synergies they want to achieve with the merger. These may include cost savings, revenue growth, increased market share, or improved operational efficiencies.

During the integration, it is essential to prioritize these synergies and develop a plan to achieve them. Highlighting each category helps visualize the benefits, including the following:

Share information technology systems: Sharing software solutions can reduce costs while granting both parties access to critical information.
Improve supply chain management: Parties can benefit from better relationships with logistic suppliers, especially when one company has a more advanced logistics system.
Increase demographic access: Blending two sets of customers increases the target market and, in turn, the revenue.
Combine product lines: Products from both companies can complement each other perfectly, creating an opportunity for new or bundled offerings.
Strengthen research and development: Merging companies often means merging ideas, patents, and company trade secrets.
Lower overall expenses: Financially, companies can benefit from only having one CEO, one HR department, and using one software license to name a few. There may be more financial gains and savings to boost the company's budget.
Collaborate on sales and marketing: Merged companies can take the best strategies of each to build a new, more robust sales and marketing initiative.

Identifying all the gains from the various synergies can inspire and motivate teams to materialize a successful merger.

4. Develop a New Company Culture

Successful post-merger integration requires culture change and acceptance between the two companies. Developing a culture all teams can relate to can facilitate the integration process.

Businesses can achieve this by encouraging open communication, teamwork, and a willingness to share knowledge and best practices. Although building a new culture requires extra effort, here are some pointers for starting the process:

Convey the vision for the new culture to the staff. The workforce will be on the frontline and experience the culture firsthand, meaning they should know how to adjust accordingly.
Reorganize the management and decide who has the best skillset for each role. When managers enter their new positions, they carry all their positive attributes.
Identify differences, weaknesses, strong suits, and other relevant features of the new company culture. Where possible, create a plan to circumvent the potential issues.
Discuss how to handle disagreements and transgressions among management as well as staff. It allows for safe boundaries in that everyone can operate.
Create hype around achieving standard benchmarks. Staff who work toward a shared goal could be more motivated. Additionally, this boosts the morale and culture of the new company.
Contemplate a new appraisal system, including a recognition or reward program.

Mergers can create stress and anxiety among team members. There may be no better way to quell these fears than to promote a positive work environment.

5. Continuously Monitor the Integration Progress

Regular progress monitoring can keep the integration plan on track. Establishing key performance indicators is one way of monitoring the progress of the different departments. In addition, companies can promptly identify and address deviations.

Below are critical functions to monitor closely:

Financial income and expenditure.
Customer reactions and feedback.
Coping strategies of the teams.
Suggestions from staff.

Each gives a different insight into the merger integration. Should management detect any problematic areas, they should be addressed sooner rather than later to achieve a successful integration.

6. Openly Celebrate Successes During Integration

Finally, it is important to celebrate successes, no matter how small. Doing so shows employees that their efforts have value and that clients gain more confidence in the new venture. More importantly, seeing smiling, happy staff members at a company event can reflect the success that they all share.

Some of the things that can be celebrated are as follows:

Staff members contribute above and beyond their normal scope of duties.
Employees or teams achieve a goal for the first time.
Team members impeccably demonstrate the company values.
The staff continually delivers excellent service.

Employees who receive constructive feedback, praise, and recognition for their efforts are more inclined to give their best each day. Although it may be a small token of appreciation, like a 'thanks' here or there, it can significantly contribute to the success of post-merger integration.

Final Thoughts

For many, the idea of post-merger integration seems daunting. However, with proper guidance and support from management, there are many ways to complete the process satisfactorily.

By following the best practices from this article, companies can ensure the realization of anticipated synergies. Furthermore, they can position the company for long-term success.