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Tuesday, May 12, 2009

PMI - Key Areas of Integration

5:30 PM Posted by Deepak Nayal , No comments

Post Merger Integration (PMI) is a huge field in itself with loads written and talked about. I have been exploring this area for some time now and looking in retrospect my experience with organizations undergoing M&A. Based on my mini research, in order to articulate my thoughts I came up with a model of my own (such an MBA cliché). I believe that there are three key top level areas of integration in PMI stage for any M&A deal –

Here Systems & Processes and Culture take care of the hard and soft aspects of the integration respectively. The last, Management, is a hygiene factor – an infrastructural aspect if you may. So if the management integration is not done well, the effects will show up in the integration of other two areas too. I believe that in any PMI initiative management integration should be given the top priority. This is not saying that one should focus all energy in doing this while forgetting the other two aspects.

Here when I say management I do not just mean the senior executive management. This includes the middle and front line managers as well, and why not; After all, it is these people who are actually looking into the operational part of the post merger organization and it is these people who interact with the employees. So if this layer of the organization in frustrated or unclear about the tasks then the effect is going to permeate throughout the organization. I think if companies put more effort in the management integration, identify leadership and assign clear roles and responsibilities upfront then the whole process of post merger integration can be made smoother. 

Friday, May 08, 2009

Post Merger Integration – an opportunity or a pitfall

3:32 PM Posted by Deepak Nayal , No comments
All M&A deals consist primarily of three main phases – Due diligence and Planning, Valuation and Negotiations, and Post Merger Integration. It is the second phase of Valuation and Negotiations that usually generates the huge public interest and media attention. All the hype usually gives people an impression that this phase is the most important in any M&A deal and should be given the most attention.

In my view, it is the post merger integration (or PMI) phase which makes or breaks any deal. No matter how much effort one puts in the first and second phases if this last phase is not done properly then all the previous effort goes waste. Unfortunately, a lot of companies do not realize the importance of this phase; I see two main problems regarding PMI in usual M&A deals.

First, PMI is – intentionally or unintentionally – given low priority in the entire deal process. One of the common mistakes one can witness is that companies wait for the negotiations to close before going ahead with the PMI. The usual argument given is – why invest into something when we may not even get it? What these companies fail to understand is that by starting to look into different aspects of post merger integration the company can foresee the possible opportunities or problems arising from the merger. This can even help these companies in valuing and negotiating with the other party.

Second, unfortunately, when it comes to PMI companies mostly focus on the hard aspects – the easily quantifiable ones – and they miss on the softer human aspects of the integration. One of the things I have realized is that almost any problem in business, be it finance or marketing or supply chain, has its roots in the human aspects. After this revelation, it is hard for me to understand how companies can ignore such an important aspect while integrating with other businesses.

I believe it is very important that companies realize these two points as early as possible in any M&A deal. Execution of any integration initiative is no doubt complex but keeping these two points in mind will help companies in utilizing the opportunity provided by the integration instead of falling into the common integration pitfall.