Post-merger Integration (PMI) can be complex, time-pressured, and unfamiliar for most organizations. It is a highly complex process. It requires swift action as well as running the core business activities simultaneously. There is no one-size-fits-all approach to a successful PMI Process. However, careful planning focusing on the strategic objectives of the deal and the identification and capturing of synergies will help maximize deal value.
It is inevitable that some elements of information will be withheld from a Buyer pre-deal. Further, not all the synergy benefits originally identified in the deal will prove to be achievable. The foremost challenge for management at the onset of the PMI process is to identify how value can be captured from the newly combined organization via synergies and cost savings.
Hence, undertaking the PMI Process requires a clear roadmap that will take the post-merger integration journey toward a more strategic and effective direction. This is where Strategy Development comes in.
The 5 Core Components of the PMI Process
Organizations must have a good understanding of the integration process to ensure that target results are achieved and that expectations are met. There are 5 core components of the PMI Process organizations must follow to make the process more successful where the deal value is achieved and realized.
- PMI Structure. This is the first component of the PMI Process that establishes the stages of the integration process. It consists of sub-projects that take place before and after the closing or change of ownership.
- Management Alignment. The second core component, Management Alignment is focused on aligning top managers of both Buyer and Target. For the first time, top managers of the Buyer and Target become part of the same organization. It is at this stage wherein there is a change of priorities and commitment of top managers. The new management team must be aligned and committed to the same goal. This way, they convey the same message to the new organization.
- First 100 Days. The First 100 Days is where the PMI Process starts focusing on making changes. The First 100 Days is the maximum period people can live with the uncertainty regarding the new organizational structure and decision on redundancy. This core component is highly critical as this paves the way towards a smooth transition to a new organization.
- PMI Project Management. The fourth component is focused on budget planning and management. It is at this stage wherein the preparation of the first estimates of integration costs during the transaction or purchase phase is undertaken.
- Kick-off Meeting. The fifth or final core component is the Kick-off Meeting. Starting teamwork is its main focus. Participants are brought up to speed on events in both predecessor entities and the joint strategy. This is the avenue to provide instructions, guidelines, and templates. A Kick-off Meeting is typically a 2-day session including the time to socialize.
The Red Flag Warning in Post-merger Integration
When going through Post-merger Integration, we can expect some red flag warnings. These are disturbances that may warrant such a red flag warning. As organizations go through the deal, there will be critical issues on personnel and customers that will arise.
One critical issue that may raise the concern of the Integration team is the possibility of losing your key personnel. Losing your key personnel can cause a dent in any organization. At this point wherein integration is happening, the more the support of the key personnel is of utmost importance. Losing them would be a great loss.
Aside from red flag warnings, there will also be key considerations organizations must take note of during integration. Being aware of these will prepare them as they move on forwards to achieving a successful deal.
Interested in gaining more understanding of the PMI Process? You can learn more and download an editable PowerPoint about Post-merger Integration (PMI): PMI Process here on the Flevy documents marketplace.
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When organizations go through a Post-merger Integration, often management realizes that it is never a simple undertaking. It is a highly complex process. Swift action is required as well as being able to run the core business activities simultaneously. There is no one-size-fits-all approach to a successful PMI Process. However, to maximize deal value, there is a need for careful planning focused on the strategic objectives of the deal and the identification and capturing of synergies.
The PMI Process requires a Strategy Development approach geared towards unifying 2 organizations into one new organization with a common culture, equipped with the right people and good leadership in place. It is a challenging journey where organizations, both the Buyer and the Target, must take on the appropriate approach to be able to start off the process and close the deal with the expected results in place.
New organizations often benchmark Post-merger Integration Process leaders to guide them through the process. By following best practices, new organizations will have a better understanding of how to approach the PMI process in a more strategic manner.
Achieving PMI Success: The Top 10 Tips
There are top 10 tips that can help organizations conquer what could be a complex integration process. Following the top 10 tips will enable organizations to successfully traverse through the process.
Let us discuss here 4 of the top 10 tips to achieve PMI success.
- Focus on Key Sources of Value. In focusing on key sources of value, we need to be able to communicate how the value of the deal will be captured. Success organizations often structure integration teams based on key sources of value. They make teams understand the value for which they are accountable and how this will be unlocked via the PMI process.
- Clearly Define Nature of the Deal. Often successful integrations are achieved when the nature of the deal is clear. Organizations need to be able to determine what is to be integrated and what is to remain as stand-alone. They need to have a good idea of what the adopted culture will be and which people are to be retained. This way, organizations can easily jumpstart the PMI process in the right direction.
- Have the Right People in Placed. Needless delays in the implementation of the PMI process can exacerbate anxieties amongst staff. This can cause speculative conversations or result in staff insecurities. To address, organizations focus on the immediate mobilization of the integration process. One way of doing this is having the right people in placed. Selecting people who are enthusiastic about the new vision and are happy to contribute it will facilitate a good start for the integration process. However, there is a need to maintain balance. People from both the Buyer and Target must be selected and appointed.
- Get the Buyer up-to-speed. This is one important tip that will jumpstart the process. Get the Buyer up-to-speed. This can be done by encouraging the Buyer to begin planning the integration process even before the deal is announced. It is of great advantage if the Buyer will identify everything that must be done prior to closing. Active participation of the buyer is essential to keep the PMI process on high gear.
Aside from the 4 top tips, the other 6 top tips are equally effective in guiding organizations to achieve deal maximization. These top 10 tips can be of great help to organizations when faced with challenging obstacles as they go through the process of integration. The PMI Process is a very complex undertaking but it can be achieved and be conquered with just the right approach and guide.
Interested in gaining more understanding of Post-merger Integration (PMI): Tips for Success? You can learn more and download an editable PowerPoint about Post-merger Integration (PMI): Tips for Success here on the Flevy documents marketplace.
Are you a management consultant?