Why are soft factors important in post-merger integration?

When it comes to mergers and acquisitions, the well-known formula for transformation applies more than ever: “Culture eats strategy for breakfast.” This means that certain factors—such as corporate culture—are the key to success. If these factors are addressed thoroughly during a merger, the goals of the transaction are more likely to be achieved.

This is because, in a merger, different cultures suddenly collide. At the same time, executives and employees are expected to achieve more together in new teams. After all, every transaction is supposed to ultimately create more value than the individual companies could have achieved on their own. However, the planned value-added benefits are often not realized because change management is neglected.

When should post-merger integration begin?

Post-merger integration should ideally begin even before the formal completion of a transaction—the “closing.” This is because, at the latest by the “signing”—that is, the agreement to proceed with the transaction—all stakeholders involved—especially affected executives and employees—begin to intensively consider the potential implications.

In most cases, it is not yet possible to foresee in detail exactly how the transaction and integration will bring about change. Therefore, in this initial phase, it is important to provide executives and employees of all involved organizations with transparency regarding the next steps and opportunities to participate in the detailed planning. Those who are involved are more willing to implement even painful changes.

How does a post-merger integration unfold?

Every post-merger integration—PMI for short—proceeds differently and has its own objectives and starting conditions for management. Based on its extensive experience supporting PMIs, Groß & Cie. structures the process and employs the appropriate tools, such as checklists to identify relevant areas for action. The first step in a post-merger integration is assessing the initial situation.

Groß & Cie. serves clients not only in Frankfurt am Main and the Rhine-Main region, but throughout Germany, Austria, and Switzerland. These professional articles provide an in-depth look at the post-merger integration process: “Culture as a Success Factor in M&A Transactions” in *Rethinking Finance* and “Post-Merger Integration Determines Success in M&A Transactions” in the *Journal for Corporate Lawyers*.

What should be done first in a post-merger integration?

Since soft factors are decisive in determining whether the goals of a transaction are achieved, the first step is to assess the corporate culture of the companies involved. Groß & Cie. identifies the areas of overlap, potential for conflict, and areas for action in a post-merger integration using a proven tool. “Cultural Due Diligence” (CDD) reveals how organizations function in practice, what beliefs shape employees, and how stakeholders can best be “on board” for post-merger integration.

CDD should be conducted before the actual integration, if possible—ideally even during the traditional due diligence process for hard factors such as financial data, etc. This ensures that post-merger integration can be optimally set up from the very beginning. To learn more about how CDD works, read more here about Cultural Due Diligence

How is post-merger integration planned?

Ideally, the plan for post-merger integration should be in place before the formal “closing” of a transaction. The plan should always include the strategy, the key areas of focus with subgoals (e.g., increasing revenue, reducing costs, retaining employees, etc.), the most important measures within each area, and, above all, the core messages guiding the integration process.

The transaction’s “deal story” serves as a crucial foundation for the post-merger integration. It’s important to build a narrative structure into the plan. To get started, it’s helpful to use the sequence 10 – 100 – 1000. What does this sequence mean? Learn more about the post-merger integration plan here

How is a post-merger integration implemented?

Ultimately, how post-merger integration is managed determines whether the plans truly lead to success and whether the transaction’s objectives are achieved. In this process, there are many foreseeable pitfalls for management, such as influences from employee participation, or resistance from executives or employees.

Groß & Cie.’s consulting services ensure that the unexpected and the unplannable are flexibly integrated into the process. Many PMI projects that Groß & Cie. has managed have shown that, for example, unexpected reactions from customers or competitors can create unforeseen dynamics. Management must then act quickly and adjust the plans. Learn more about Post-Merger Integration Management here

 The following examples illustrate the implementation of post-merger integration: