Chapter 32

Powering Up for Postmerger Integration

Jean-Michel Caye, Jeanie Daniel Duck, Daniel Friedman, Dan Jansen, Joe Manget, Alexander Roos, and Peter Strüven

The authors would like to thank their colleague Patrick Campbell for his contribution to this chapter.

Title Page

Roughly half of all mergers and acquisitions (M&As) fail to create shareholder value, and about one-quarter actually destroy it. One of the biggest pitfalls is that companies tend to treat post-merger integration (PMI) as a mechanical process that occurs after the deal is done. But it is the strategic and tactical choices that are made before the deal is legally closed—and often before the bid has even been made—that ultimately determine whether the integration will succeed or fail.

Finding the Strategic Pulse of a PMI

It is an ostensibly simple yet critical question that is sometimes overlooked: What is the strategic logic of the deal? Is it to consolidate and generate cost synergies? Is it to grow more rapidly by acquiring new technologies and capabilities or entering new geographies? Most often it is a combination of many things. The answer will determine virtually every aspect of the integration.

As a general rule of thumb in a consolidation merger, if the lion's share of the cost synergies is not delivered 12 to 24 months after a deal is signed, the merger is unlikely to be successful. Consolidation acquirers need ...

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