Post-merger integration

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Post-merger integration or PMI is a complex process of combining and rearranging businesses to materialize potential efficiencies and synergies that usually motivate mergers and acquisitions. The PMI is a critical aspect of mergers; it involves combining the original socio-technical systems of the merging organizations into one newly combined system.

Corporate synergy refers to a financial benefit that a corporation expects to realize when it merges with or acquires another corporation. Corporate synergy occurs when corporations interact congruently.

Mergers and acquisitions transactions in which the ownership of companies, other business organizations or their operating units are transferred or combined

Mergers and acquisitions (M&A) are transactions in which the ownership of companies, other business organizations, or their operating units are transferred or consolidated with other entities. As an aspect of strategic management, M&A can allow enterprises to grow or downsize, and change the nature of their business or competitive position.

Contents

Overview

The process of combining two or more organizations into a single organization involves several organizational systems, such as assets, people, resources, tasks, and the supporting information technology. [1] The process of combining these systems is known as 'integration'. Integration Planning is one of the most challenging areas to address pre-close during a merger or acquisition. [2] [3] Even though culture clash between companies can cause integration problems, only 4% of the executives in a survey by Pritchett, LP reported that their organizations include culture-specific questions in their due diligence checklists. [4] Culture specific due diligence may include cultural screening and creating a cultural profile of the target firm. GE Capital conducts a cultural assessment of prospective candidates against metrics such as trust in existing managers, language barriers, and operating processes to then facilitate a culture work out session between both sides. [5]

An example of a typical structure for an integration consists of three layers: a steering committee, an integration management office (led by an integration manager) and a variety of additional teams organized by function (i.e. sales, human resources, finance, and information technology, etc.) and/or by business unit, product line, process, or geographic location. [6]

The integration management office, or IMO, manages core functions of the integration effort and provides structure for integration delivery. [7] In a survey by Global PMI Partners of 143 M&A executives, 67% of respondents incorporate IMOs during an acquisition on at least half of their initiatives in a cross-border setting. [8] [ verification needed ]

More communication to employees is usually necessary during post merger integrations than during day-to-day operations. [9] Fortunately, many of the questions from employees can be anticipated. [10]

Achieving successes early in an integration can help build confidence in a deal and quiet skeptics. [11]

Common problems that may be encountered during post merger integrations include resistance to change, divided loyalties, blurred roles and responsibilities, unclear reporting relationships, communication tangles, job insecurity, unusual employee turnover, and infighting.  [12]  


Organizational lifecycle

Integration fits within an organizational lifecycle or specific business mergers and acquisitions cycle where businesses buy, integrate, then dispose of businesses:

See also

Related Research Articles

Organizational culture encompasses values and behaviors that contribute to the unique social and psychological environment of a business. The organizational culture influences the way people interact, the context within which knowledge is created, the resistance they will have towards certain changes, and ultimately the way they share knowledge. Organizational culture represents the collective values, beliefs and principles of organizational members. It may also be influenced by factors such as history, product, market, technology, strategy, type of employees, management style, and national culture. Culture includes the organization's vision, values, norms, systems, symbols, language, assumptions, environment, location, beliefs and habits.

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Due diligence is the investigation or exercise of care that a reasonable business or person is expected to take before entering into an agreement or contract with another party, or an act with a certain standard of care.

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In organizational studies, resource management is the efficient and effective development of an organization's resources when they are needed. Such resources may include financial resources, inventory, human skills, production resources, or information technology (IT) and natural resources.

Power distance is the strength of societal social hierarchy—the extent to which the lower ranking individuals of a society accept and expect that power is distributed unequally. It is primarily used in psychological and sociological studies on societal management of inequalities between individuals, and individual's perceptions of that management. People in societies with a high power distance are more likely to conform to a hierarchy where "everybody has a place and which needs no further justification". In societies with a low power distance, individuals tend to try to distribute power equally. In such societies, inequalities of power among people would require additional justification.

Conflict management is the process of limiting the negative aspects of conflict while increasing the positive aspects of conflict. The aim of conflict management is to enhance learning and group outcomes, including effectiveness or performance in an organizational setting. Properly managed conflict can improve group outcomes.

Project Management Professional (PMP) is an internationally recognized professional designation offered by the Project Management Institute (PMI). As of August 2019, there are 932,720 active PMP certified individuals and 300 chartered chapters across 218 countries and territories worldwide. The exam is based on the PMI Project Management Body of Knowledge.

Enterprise relationship management or ERM is a business method in relationship management beyond customer relationship management.

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Orange Business Services

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Management due diligence is the process of appraising a company's senior management—evaluating each individual's effectiveness in contributing to the organization's strategic objectives.

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References

  1. Anthony F., Buono; Bowditch, James L. (1989). The human side of mergers and acquisitions: Managing collisions between people, cultures, and organizations . San Francisco: Jossey-Bass Publishers. ISBN   1-55542-135-0.[ pages needed ]
  2. Dr. K.M. Popp. "Merger Integration Due Diligence". Mergerintegration.eu. Retrieved 2014-07-21.
  3. [ dead link ]
  4. "Corporate Culture: The "X Factor" in Merger Success and Failure". Mergerintegration.com. Retrieved 26 June 2019.
  5. Lee Marks, Mitchell; H. Mirvis, Philip (December 2011). "A framework for the human resource role in managing culture in Mergers and Acquisitions". Human Resource Management. 50 (6): 859–877. doi:10.1002/hrm.20445.
  6. "The 5 Critical Elements of an M&A Integration Plan". Mergerintegration.com. Retrieved 26 June 2019.
  7. Hofmeyer, Stefan; Whitaker, Scott C.; et al. (2016). Cross-Border Mergers and Acquisitions. Hoboken, New Jersey: John Wiley & Sons, Inc. ISBN   978-1-119-04223-5.[ pages needed ]
  8. "Post-merger integration specialists – cross border experts". Gpmip.com. Retrieved 26 June 2019.
  9. "Top 10 Reasons Why More Employee Communication Is Necessary When Merging Companies". Mergerintegration.com. Retrieved 26 June 2019.
  10. "M&A Common Questions from Employees, Customers, and Media". Mergerintegration.com. Retrieved 26 June 2019.
  11. "Engineer Early Success in Your Merger". Mergerintegration.com. Retrieved 26 June 2019.
  12. Price, Pritchett; Pound, Ron (2018). Smart Moves: A Crash Course on Merger Integration Management (PDF). Dallas, Texas: Pritchett, LP. p. 8. ISBN   978-0944002032.