Post-merger integration issues in tech M&A
Pinsent Mason’s new survey Ahead of the Curve finds that post-merger integration is still a stumbling block for dealmakers.
Post-merger integration never really hits the headlines in the same way as big deal announcements. However, often it is one of the only true measures of success. And it also presents a unique set of challenges. Respondents highlight integrating systems and operations (29%) and combining management teams (23%) as the main integration challenges. “Combining management teams is one of the most difficult things to do,” observes the chief of staff at a global technology supplier. “In addition, one of the obstacles not referred to in the study is the challenge of bringing the target’s product to market.”
Integration can be – potentially – the thorniest of all M&A challenges. There’s no one-size-fits-all model and every merger is unique. Successful integration of companies with different business models – and cultures – demands tact, creativity and patience on the part of the buyer. Cross-border acquisitions can present particular challenges in this respect. Buyers also need a clear vision on the extent of integration that is desirable: for example, achieving the greatest value from an acquisition might mean allowing it to operate as an independent business unit. Such an approach may be appropriate in cases where a brand or a product is tied to a highly specialised set of capabilities.
“Companies need to define a target model for the integrated team – there is room for improvement in the anticipation of the management structure, labour law considerations and integrated technology impact,” says Frédéric Ichay, Partner at Pinsent Masons. “The physical organisation must also be taken into account, particularly where there are multiple locations or different countries involved. Remote management, from a different country, is not the same as being next door to someone. Dealing with these challenges is increasingly part of the due diligence process and pre-acquisition exercise.”