Mergers and Acquisitions

Chapter 6. Postacquisition Integration^[1]

General

Chronologically, the postacquisition integration process starts after the transaction has been finalized. However, if it is seen as a discrete activity beginning immediately after the close, it is extremely unlikely that it will be executed efficiently and effectively, and it is virtually guaranteed not to meet the operational objectives expected as well as the financial assumptions embedded in the valuation model used to gain approval for the transaction.

It has become an article of faith in acquisition lore that the lack of effective integration accounts for a large portion of acquisition failure (i.e., the inability of the investment to justify itself on financial terms). More often than not, these failures can be traced directly to poor integration execution, which in turn can be traced to poor integration planning.

Integration and Synergies

Therefore, it is important that postacquisition integration is seen in the context of the entire acquisition process, beginning with the strategic rationale for the transaction. This can be best understood by visualizing the link between synergies and integration. To a great extent, integration can be seen as the process of extracting the value of synergies. As a result, integration issues should be identified as early as possible in the acquisition process, and preliminary integration planning should begin when synergies are identified and incorporated into the valuation of the target company. ...