A Review of Business Consulting Literature to assess the Effects of Mergers and Post-Merger Integration.
"What can we learn from the business consulting literature?
Mergers and acquisitions are risky undertakings that achieve the primary goals of the surveyed managers substantially more than half the time, but are only successful in a more quantitative financial sense (i.e., raising shareholder value relative to pre-deal levels) about 30 to 55 percent of the time.
Can they be made to work better? It seems so.
Mergers in the 1990s are believed to have been more successful than those in the late 1980s, and there is some evidence that the results of mid-1990s deals have been surpassed by those in the latter 1990s.
There are some factors that business consultants identify as being keys to enhancing the chances that a deal will succeed.
- The first factor is choosing a deal that makes strategic sense - one that fits with the firm’s larger goals and objectives.
- Once it becomes clear that the deal suits the firms’ purposes, then implementing the deal and integrating the assets becomes important.
- Certain types of deals, such as mergers of equal-sized firms with strong differing cultures, seem particularly difficult to implement, even if they meet the strategic goals of the acquiring firm.
- On the other hand, those deals that occur in the same or related business and that make use of existing firm strengths appear to work somewhat better.
The consulting literature stresses several factors that are thought to improve the chances that the deal implementation will prove effective. These factors include: early planning for the integration process, setting and communicating clear goals, identifying the responsible managers and providing them with appropriate incentives, moving quickly to define those areas where gains can be achieved, keeping everyone informed with tailored messages including employees and customers, integrating systems quickly, being sensitive to cultural issues, retaining key employees, and retaining sales force activism to avoid the loss of customers to rivals.
The importance of these factors may vary from deal to deal as characteristics of the deals change, but the one over-riding factor is the need to plan early for the integration of the new assets. This early planning is intended to allow the combined firms to obtain the merger-related gains quickly and to build an early period of enthusiasm surrounding the transition."
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