After conducting interviews with M&A practitioners in North
America in mid-market companies, in its report titled "Harnessing Potential: mid-market integration and
managing change", Mergermarket found that operational
integration early in the process and focusing on the culture of
companies being merged or acquired can not only
make a deal run more smoothly, but can actually increase
In an M&A transaction, the integration process is key. In
Mergermarket's study, 47% of respondents reported that they
started to consider merger integration strategies during
negotiations. As well, 73% of companies had an integration plan
completed prior to the deal signing. The effect of thorough
integration plans is subtle but clear; companies that had
integration plans achieved a 90% level of operational integration,
while those without only had a 84% level of operational
integration. This effect is also felt at the management level. With
integration plans, 86% of the management team was integrated.
Without, only 77% of the management team were integrated.
When planning an integration process, cultural integration
cannot be ignored. Mergermarket's study found that a failure to
integrate employees significantly reduced the value of the deal.
Mergermarket suggests that this may indicate that while companies
understand the need to culturally integrate the merged or acquired
companies, a lack of resources and lack of planning in the
integration process can seriously impact the deal.
Finally, Mergermarket's study adds more support for the
growing understanding that thinking past the basic structure of the
deal to the eventual operational and cultural integration is
necessary to ensure that deal value is maximized. A focus on
planning integration in advance and on the cultural impact of
organizational change can set up the M&A deal for success even
before the deal is signed.
The author would like to thank James Foy, articling student,
for his assistance in preparing this legal update.
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