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back to index backAMERItalk January,  2006

Successful Mergers Start Here: Tips on Facing Four Important M&A Challenges

Planning and Communication Are Key to Success

Today's merger & acquisition environment is defined by constant change, requiring a heightened level of commitment, creativity and responsiveness. And while you're at the ready, earnings pressure, market convergence, widespread deregulation and unprecedented technological advancement change the M&A scene yet again. This tumultuous environment, along with the difficulty of executing many of the best practices required for a successful merger, result in many newly formed companies with little to show for their work.

How can companies entering a merger improve their likelihood of success? Deloitte examines some common M&A challenges we've helped our clients tackle, and offer our thoughts on approaching their complexities head-on.

Challenge 1: Communicating a clear understanding of the anticipated value the merged companies hope to create.

Approach: The merger's purpose and strategy should be clear not only to senior management, but to all people involved in pre-merger planning and in post-merger integration. While cost reduction may be a critical concern, most people are motivated by something more grand: a vision of how the combined company will be better able to increase revenues and gain market share than either company could do on its own.

Challenge 2: Creating a merger integration plan that can be accomplished quickly.

Approach: Integrating quickly is just as important as integrating well. To maximize your chances of success, here are a few ways to rapidly integrate your acquisition:

Build a detailed merger integration plan. It should note tasks big and small, and represent the larger vision embodied by the merger. This roadmap will guide you through the daily decisions and tasks that ultimately determine how successful your merger will be.

Create a ‘clean team' of employees from both organizations to work on the integration. Since antitrust rules prohibit companies from sharing confidential information about their business practices until a lengthy regulatory review process has been completed, it can be difficult to develop integration plans until that regulatory review process has been secured. Use of a ‘clean team,' comprised of individuals who are legally isolated in the pre-merger state, can allow the companies to complete an integration plan before the merger closes.

Involve senior management. Active participation from senior managers is critical to rapid merger integration success. If the managers share the same vision for the merger, decisions can be made easily and rapidly.

Choose the best aspects of each company. Don't try to blend processes or design new ones from scratch. Examine each aspect of both businesses and choose the superior one. Resist the tendency to choose IT systems or products based on tradition, politics or personalities.

Challenge 3: Continuing to serve your customer during the merger.

Approach: A merger means big organizational changes ahead. It's easy to lose sight of the reason you're in business in the first place – to serve your customer. Make sure the majority of your company remains committed to driving revenue growth and supporting the existing business. Identify a very small, select group of people who are dedicated to merger activities.

Challenge 4: Addressing employee concerns about the merger.

Approach: Don't sweep the human and cultural impacts of the merger under the rug. Fail to address these issues directly – and frequently – and your employees could spend more time thinking about their jobs and benefits than about sales and customer satisfaction. Also, consider the business culture of the new entity. Employees from both organizations need to learn to think of themselves as members of the same team. Try not to pick one dominant culture over another. Instead, try to bring the best of both groups together into a culture that reflects the vision of the new business.

Source: Deloitte Touche LLP - GAI

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