The Ultimate Guide to Post Merger (M&A) Integration Process

An old adage compares the process of mergers and acquisitions to trying to complete a large puzzle when your right hand and your left hand have never worked together.

To put it mildly, mergers and acquisitions revolve around a plethora of moving parts.

Further complicating matters is the fact that there are suddenly two companies and additional stakeholders that now need to fairly and seamlessly work and communicate together in order to bring the deal to completion.

But what happens after the deal has (seemingly) crossed the finish line? Furthermore, what is post-merger integration, and how to get it right?

As dozens of companies conduct their PMI projects with DealRoom, we've been able to gather valuable insights on this matter.

In this guide, we'll look at the importance of M&A Integration, process, best practices, post-merger integration software, and the true post-merger integration meaning.

Last but not least, DealRoom also provides helpful integration checklists you can try for free. More on that further ahead.

But let's first look at the M&A integration definition.

More specifically, problems in mergers and acquisitions often cause deals to fail, or, at the very least, result in the inability to extract true value from deals - no one wants a deal that looks good only on paper or results in a semi-integrated company. This is further supported by research done by McKinsey in 2016:

"Companies that deliver integration will achieve growth of 6-12% higher than those that don’t"

Most companies enter the M&A process with the best intentions, but ultimately succumb to common traps that derail the deal. It is important to note that more than 55% of mergers and acquisitions fail to return intended value.

The M&A Spectrum below highlights just how difficult it is to successfully realize the value targeted at the beginning of the M&A process.

With this in mind, post-acquisition merger planning must begin at the beginning of the deal, and best practices, integral team members, and M&A integration plans must be established before the deal closes.

Who is Responsible for M&A Integration and Other Post-Merger Activities?

1. Top Executives & Stakeholders

One of the top post-merger success factors is placing value around mergers from the top down.

At the commencement of the M&A process, a company’s executives should gather all of the potential stakeholders involved in a deal’s due diligence process — bankers, lawyers, consultants, etc.

And begin communicating from the start about the details of the post-merger integration.

Better yet, each and every communication in the diligence phase during M&A integration should also have an eye on the post-deal integration period.

2. Diligence of Team Members

Post-merger integration best practices prove that the people doing diligence should become part of the team in order to retain and revise the information without redoing work or engaging in redundant tasks.

When using the same individuals for diligence and integration, there is continuity, which is invaluable during the often chaotic time of deal closing and post-acquisition integration.

The benefits of this continuity are numerous.

Consider, for instance, the time it would take for the diligence team members to do a full data transfer to the team.

• Would every bit of information really get transferred?
• What about the overlooked notes on notepads that do not get passed on?

Clearly, even the best-intended data hand-offs would end with some gaps and oversights.

In addition, let’s say that in the best-case scenario all of the information from the diligence team does get to the integration team - will the members really go over all of this work?

Importance of Communication

Most likely not because they will be under the gun and strapped for time, which, again, will result in gaps of knowledge and oversights.

Hence the importance of eliminating disconnected communication.

This is why acquirers use DealRoom to centralize all communication, tasks, and files in one place, which leads to improved collaboration and efficiency amongst all teams.

Consequently, the best and most efficient way of integrating is to have an overlap between the diligence and the integration team.

This model also increases the likelihood that the team will maintain its momentum and capture synergies, or “low hanging fruit,” of the deal that are found within the first 120 days, thus making it a key M&A integration strategy.

3. Human Resources

More and more M&A practitioners are understanding the importance of M&A integration planning, but operations (even those at major acquirers) still often miss the mark because the all too important “people” factor can get lost in the shuffle of modern business life.

This misstep can lead to the loss of employees and clients during the very critical early days of integration when competitors tend to go after both employees and clients of the target company.

With this in mind, practitioners need to be ready to execute and communicate on day one important information about targets, employees’ positions and benefits, and the future of the company - obviously Human Resources plays a vital role in the “human” piece of integration.

4. A Change Management Expert

HR cannot do it all, however; your acquisition transition plan will not be successful if it doesn’t take into account change management. The first rule related to change management best practices is to make change management its own role.

‍Some of the benefits of having a change management expert on your PMI M&A team are: the buyer gains valuable information about the target company (which can help maximize potential deal value), the target company feels cared for and employee morale/buy-in improves, and secrets are revealed (i.e. information comes to light that current leadership may be totally unaware of ) - all of which will help avoid major and costly problems.

One final note when it comes to putting together an M&A integration team and acquisition merger plan: when selecting a leader, recommendations should come from members of the diligence team - remember, strong practices and the valuing of post-acquisition integration comes from the top-down.

Many of the major pain points and obstacles present during the M&A process can be identified and overcome with the right combination of process, tools, training, and project management approach.

The Agile methodology is specifically designed to eliminate many of the risks associated with contemporary mergers & acquisition initiatives. A new model for M&A comes with a new mindset: rather than focus on pre-planned cost synergies, Agile M&A is based on continuously discovering and capturing value.

When complemented by the right toolset, the Agile M&A approach enables both sellers and buyers to manage the highly unpredictable M&A processes with maximum efficiency and accuracy.

DealRoom's Agile M&A Principles

Were developed specifically to address and avoid the traps of integration by enabling diligence and integration planning in parallel, making it the only project management tool designed to enable collaboration across the deal lifecycle.

The checklist needs to include plans for the following: hiring processes for short and long-term needs, redundancies, turnover, employee retention, M&A IT integration, technology, systems merging, tracking employee performance, and more.

It is also important for those in key roles to take a post-merger integration questionnaire to help them understand and align goals.

Post-merger integration plan includes:

1. Hiring process

• Short-term needs
• Long-term needs
• Process
• Benefits/Compensation

2. Overlap/redundancies

• Secure top employees
• Layoffs and severance forms

3. Technology

• New org chart
• Merge systems

4. Employee Performance

• Training plans
• Employee review documents and procedures
• HR systems

Additionally, we've put together this PMI framework, which can be further helpful in setting your company up for post-close integration success.

From production to culture, replicate and use this framework as your go-to reference point and ease your integration with our integration planning framework.

M&A Integration Checklist

This is the most complete Post-Merger Integration checklist on the internet.

The best part?

Everything on these lists is based on DealRoom's vast experience and works GREAT.

We’ve broken this checklist down into sections that cover the main focus areas of post-merger (or post-acquisition) integration.

Let’s dive right in…

• Post Merger Integration Checklist
• Integration Plan Day 1 Readiness Checklist
• Legal Integration checklist
• Information Technology M&A Integration Checklist
• Communication M&A Integration Checklist
• ‍Finance M&A Integration Checklist

You don’t need to implement everything on these checklists, as planning for integration means being specific.

In general, however, you’ll need to pay attention to all of the above for a holistic post-integration strategy.

The more effort you put into practice, the higher the chance of successful integration you’ll get.

More on integration planning is below.

How to Use This Post-Merger Integration Checklist

DealRoom is regularly asked by companies that have recently conducted M&A transactions about how to integrate an acquired company, as this process demands good planning.

As an answer, we see dealmakers use these exact checklists to successfully plan and prepare for their integration processes.

To get started right now, pick any of the checklists above and click on "request a playbook demo".

Our checklists are packed with many helpful features, such as:

• Expert-developed and complete integration playbooks
• Ensures that nothing is missed during the integration process
• Integration workstream progress tracking
• Analytics and reporting that matters
• Easily accessible knowledge transfers
• Many more...

Integration Planning

The complexity of the integration process demands good planning.

Research conducted by consulting firm McKinsey in 2016 suggests that even of those companies that felt adequately prepared for acquiring a company, around 1 in 6 dealmakers felt they were insufficiently prepared for integration.

The business environment over the last two decades has significantly changed, but the M&A integration process has been stuck since the 1990s.

Furthermore, in the same research, McKinsey found that the companies which deliver integration will achieve growth of 6-12% higher than those that don’t.

Planning for Value Creation

Each deal is unique and requires careful planning, from diligence to post-merger integration, so that value is created and realized for the acquirer. In integration, more than any other phase of the M&A process, planning means being specific.

Turning to textbook examples can be helpful in, say, the process of creating a target shortlist.

That is not the case with integration, where the specifics of the relationship between the buyer and the target reflect how the integration process should play out.

In the broadest terms possible, the team which is responsible for the integration process should focus on the value drivers of the deal, and ensure that these shape the sequence and pace of the integration.

In general terms, solid integration planning needs to pay particular attention to:

Capitalize on Low-Hanging Fruit

Make the core value proposition of the deal your immediate focus. Whether it’s cross-selling, upselling, the sale of redundant capital assets or anything else, do the easy things first.

Value Creating Processes

Which processes made the company acquire an attractive one? Was it the company’s product lines, its R&D, its sales and marketing, or something else?

Value Creating People

Establish early on how important the team that you’re acquiring is to value creation. This is particularly important when acquiring professional services firms, but less important (not unimportant) when acquiring manufacturing firms.

Trust Your Functional Teams

If you have good management in place, integration usually works best on a function-by-function or cross-functional basis. Delegate responsibility to these teams, following up regularly to check progress.

Establish Milestones

Whatever the plan you draw up, it’s important to establish milestones early on in the integration process. Know which changes are required and when. As an oft-repeated M&A mantra goes: ‘what drags gets dirty.’

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Understanding The Integration Spectrum

While the importance of integration cannot be overstated, the level of integration is a crucial consideration.

Just as it is possible to not integrate enough, it can happen that a company integrates too much, destroying value by fundamentally changing aspects of the acquisition which made it so attractive in the first place.

Kearney identifies four stages that help companies integrate to get this right.

1. Mentorship

The acquired company remains largely unintegrated, with only support functions such as payroll and administration being brought under the company umbrella. Above all, the value generation for the acquired company comes in the form of access to the resources of the acquirer. This form of integration works best in cases where the acquired company has something unique (i.e. a startup culture), which the buyer would only endanger by integrating.

2. Cooperation

Similar to mentorship but with more emphasis on shared learning and increased capability for both sides. A good example of this could be seen in a large, somewhat cumbersome technology firm acquiring a startup in an area like AI or XR (extended reality). The startup’s output could add value across the acquirer’s product and service line, but ideally, could continue to operate as before.

3. Targeted Integration

A further step along the integration spectrum is targeted integration, which looks to integrate certain functions but not others. Unlike Mentorship and Cooperation, this does involve cultural integration - the acquired firm will become a fully fledged part of the buyer’s organization. What’s important is that value generating functions don’t change, however. For example - store branding or highly effective marketing practices.

4. Full integration

The thrust of this article - full integration of the two companies, where the differences between both soon become indistinguishable.

Area Types of Post Merger Integration

Data and Knowledge

This area includes a plan on how to integrate knowledge such as customer, product, and service data.

Technology and Systems

Integrating companies need a strategy for combining their technology and systems. For example, if both companies use different CRMS, which CRM will they use in the future?

Internal Policies

How will the two integrating companies handle internal policies such as new employee training, salary changes, employee exits, etc.?

Business Procedures

This area includes the strategy behind future business operations such as sourcing new business and future mergers.

Company Culture

Company culture is the backbone of any business. If one company is an 8 AM - 5 PM Monday through Friday, and the other company has flexible hours and work-from-home days, there are sure to be clashes. Before M&A integration is complete, the two companies need to decide on the company culture that will emerge post-close.

This survey of M&A executives by Jabian resulted in most respondents saying culture – far more than other factors – is most important to an integration team working to combine two organizations.

Organizational Structures

This area includes organizing department structures. For example, will the two human resources departments become one, or will each one take on different responsibilities?

Products/Services‍

Before the companies integrated, they each had their own set of products and/or services. They will need to decide whether to continue, combine, or eliminate the products and/or services offered, as well as the branding associated with them.

Types of Post-Merger Integration

There are four typical types of post-acquisition integration.

1. Absorption

Absorption takes place when the acquiring company completely absorbs the target, including all processes, organizations, and procedures.

2. Symbiosis

Symbiosis only occurs in certain areas to help meet the goals of the merger or acquisition.

3. Preservation

The target company is mostly kept self-governing, however, some integration may occur with financial information.

4. Holding

This is when the acquiring company holds ownership of the target company, but they don’t integrate with each other.

M&A Integration Process Steps

The post-merger integration process (or M&A integration process) is greatly affected by the planning or lack thereof, that takes place at the start of the deal’s lifecycle.

Ongoing research by consulting firm KPMG suggests that 70% of the value erosion for deals that fail occurs at the post-integration phase.

Putting this in different terms: Billions of dollars are lost every year because companies fail to properly implement integration after an M&A transaction. This is why integration is so important to M&A.

Here is an outline of the process - to aid you in your M&A integration plan:

1. Start Planning Right From the Get-Go

M&A Integration planning must begin at the beginning of the deal and goals need to be re-evaluated regularly throughout the integration.

Teams are also assembled around aligned cross-functional goals. This enables everyone to have a big-picture view and eliminate common cross-functional dependency issues.

2. Hold a Kick-Off Meeting

A kick-off meeting should be held at the commencement of the deal. At this meeting, a list of people to be included in this phase must be generated. During this stage, it is critical to clarify governance and determine the operating post-merger integration framework for how teams will work together, such as setting up meetings, managing dependencies, and sharing info.

3. Due Diligence

While due diligence is not historically categorized as a part of PMI, successful M&A integrations keep a sharp eye during diligence.

Tools such as DealRoom’s M&A software, help companies, including VALTA and many others, plan for PMI before the deal closes.

4. Pre-Close Review

Pre-close (again not technically part of PMI, but essential to a positive outcome) - synergies should be reviewed and confirmed and teams and team leaders should be established.

5. Hold a Post-Merger Kick-Off Meeting

6. Establish Communication Channels

Institute communication channels and reporting via weekly or monthly stand-ups.

7. Post-Close Review

Teams review and evaluate the post-acquisition integration throughout constant short iterations. This makes it easier to realign a team and its goals as new information arises.

In order to accomplish a successful merger and avoid common risks, a thorough plan has to be in place before the deal closes.

Teams need to create a game plan and M&A integration checklist for the employees, set goals, track progress, and have open communication.

As mentioned above, DealRoom offers numerous proven post-integration checklists and templates that you can see in action in our roadmap tool for free right now.

However, many teams are no longer following the traditional methodology of integration playbooks.

Why manage Post-Deal Integrations the same way you did 20 years ago?

They deliver value to the deal by continuously improving value delivery processes following the Agile strategy methodology instead.

How Long Does Post-Deal Integration Take?

There is no set time frame for how long should post-merger or acquisition integration last.

Every deal is different, therefore, every post-deal merger has its own rhythm.

It can take months, if not years to fully complete.

However, no matter what type of deal is taking place, planning should begin early, alongside diligence, and before the deal closes.

Post-merger Integration Best Practices and M&A Integrated Solutions

Ongoing research by consulting firm KPMG suggests that 70% of the value erosion for deals that fail occurs at the post-integration phase.

There are many different strategy types, but here are some general post-merger integration steps and best practices to follow for a successful outcome:

The List of M&A Integration Best Practices

1. Eliminate workload friction by having honest conversations and setting a detailed budget

While having a separate company merger team is not possible for all companies, there are some things smaller corporations can do to make sure the key players have a balanced and manageable workload.

In order for post-acquisition tasks to receive the attention they need, honest conversations between workers and Corp-Dev need to be had.

What can actually be accomplished?

Are there day-to-day tasks or projects that can be handed off to other employees while certain people work on merging? In some cases, companies might consider hiring temporary workers and building this into the budget.

The budget needs to be looked at very closely and with realistic eyes.

2. Use Agile-inspired practices & sequencing to

• Establish clear expectations

A lack of clear expectations can bring chaos and negative emotions to mergers and acquisitions. Luckily, expectations can be set by prioritizing tasks for the business integration plan, which leads back to the key objective.

More specifically, the power to ask the right questions, at the right time, can be harnessed through daily, or almost daily, sequencing and prioritizing with the target company. This will be scary at first for the target company, and perhaps for you, too, but the benefits are immense.

Most importantly, this style of sequencing keeps the focus on the objective and only the tasks related to that objective; unnecessary work is also eliminated, thus reducing deal fatigue.

Although the target company might initially be weary of the daily contact, they will ultimately reap the benefits of focused practices and experience the mental joy of seeing the list of tasks become smaller and smaller.

• Bring important topics to the forefront earlier

Another advantage of sequencing, stemming directly from the above points, is that the increased contact with the target company about priorities will allow critical conversations to come to the floor earlier in the life-cycle of the deal.

Limiting priorities (everything cannot be high priority) allows stakeholders to see the reality of the deal (what will and will not happen in the future) and reduces churn because it becomes clear early on that not everyone will get what he/she wants out of the deal.

• Save company morale

Just as individuals react with a wide variety of emotions to shifts in their personal lives, they also follow a pattern of emotional responses to variations in their work lives.

Although models of the change curve use slightly different terms, experts agree when workers are faced with major changes at work, they often travel from denial to anger, to depression, and then, hopefully, move to stages of acceptance, hope, and commitment.

In simpler terms, when changes are implemented or mergers and acquisitions take place, morale often tanks, workers become preoccupied with fears and doubts and productive work suffers.

Agile can help with this as seen through some post-merger integration examples, namely the Disney-Pixar acquisition.

This M&A integration was especially successful because employees did not feel as though their entire worlds were changing in a short period of time; rather changes were implemented slowly and methodically based on their priority ranking.

Strong company morale is vital to any PMI framework.

3. Take advantage of M&A tools that can also serve as post-merger integration tools

While a tool is never the cure-all for any team’s M&A problems, the right tool, and M&A software can speed up the M&A integration process and produce valuable data for teams.

VDRs and project management platforms designed specifically for M&A, such as DealRoom (for deals 50M and greater) and FirmRoom (for deals under the 50M mark) can literally keep all parties, and new coworkers, on the same page. Executives can no longer simply rely on Microsoft Excel when there are more efficient tools and technologies.

In fact, DealRoom’s PMI tools can be used to super-charge your merger needs as it is a process management tool with an overlay for due diligence management. When the buy-side or banks use DealRoom, they see increased collaboration and a massive cut-down of emails.

When DealRoom’s use is continued to post-closing activities, its data can be reused and the tool itself can help avoid duplicate work - a common pitfall that slows the entire process and wastes valuable employees’ time. More specifically, items can be tagged during the diligence process for M&A integration.

4. Set up one-on-one interviews with employees from the target company

Successful M&A merging practices don’t overlook the fact that focus on change management, as alluded to above, is a vital part of the M&A integration plan.

5. After approximately 6 months, conduct a climate survey using a post-merger integration questionnaire and present findings to executives

Many stakeholders are fooled into overlooking the power of strong change management and integration practices.

Indeed, sometimes when conducting smaller deals, the buy-side can get away with sloppier methods and disregard the important leg work related to proper change management.

However, as deals get larger, ignoring change management will certainly lead to post-acquisition problems.

The crux of the matter is big deals demand robust change management practices. Experts recommend that around the six-month mark,  employees should be given a climate survey. Again, the data collected should be analyzed and the feedback should be delivered in a report to upper-level management.

This will allow the company’s leadership to take a look at what is going well and what still needs to be addressed, or worked on further, in order for the integration process to continue to move in the right direction.  

6. And finally, don’t rely too much on those infamous M&A Post Merger Integration “playbooks:”

While there has been a growing desire for deal “playbooks” over the last few years, the notion of playbooks has begun to take on a more negative connotation in the industry due to the fact that no two deals are exactly alike.

It is impossible to have a PMI template for every aspect of a deal because all deals involve different people, emotions, products, and risks. Even if your target company looks very similar to a past target company, you must consider that a current deal could be different because you, as the acquiring company, may have changed.

One could even go as far as to say that the desire to follow an M&A integration playbook is dangerous to the deal itself as it can cause tunnel vision, hurting big-picture alignment and customer relations and failing to recognize the uniqueness of each deal - all of which will jeopardize maximizing the value of the deal. Instead of turning to playbooks, try to shift your mindset to being a bit more Agile, or flexible, and consider frameworks and other PMI tools.

While playbooks are not ideal for the fluctuating/irregular world of M&A, basic game plans and frameworks are relevant. It is both practical and human nature to want to look at past deals and see what may or may not apply to your current deal.

Within this post-merger integration framework, you will generally want to know how you will begin the M&A process and who will be involved, but all players need to acknowledge that the exact approach is what everyone will be working together in an Agile manner to uncover.

Through discovery and analysis, the post-merger integration framework must allow for taking time to understand the customer and the target company, which is a major benefit of Agile - teams become efficient and much more customer/people-focused.

M&A Integrated Solutions and DealRoom as a Post-Merger Integration Tool

Poor post-deal integration practices are the number one cause of PMI failure. DealRoom helps you stay away from common post-acquisition mistakes, and increases the chance of a successful post-merger integration.

The platform enables users to plan properly from day one and the very beginning of the diligence process. Teams have access to all the files and data prior to the deal closing, allowing them to spot areas of concern and plan accordingly.

The DealRoom also allows users to set cross-stream dependencies across multiple functions. All deal team members can see the progress of the deal as it unfolds, in real-time.

This enables employees in key roles such as managers, department heads, and human resources, to have access to information and updates on a regular basis.

DealRoom also has a PMI plan template for users to download. Ready for a better process that helps maximize deal value? Request our M&A integration software today.