Mastering the Merger Four critical decisions that make or break the deal
Mastering the Merger
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Mastering the Merger

Many companies take a very holistic, work-plan-centric view of integration. That approach is understandable-everyone wants to tackle problems in a comprehensive way-but it contains a major pitfall. The truth is, only a few integration activities really drive the success of a deal. If taking a broad-based approach makes acquirers take their eye off those few key activities, it can be a recipe for trouble.

While every integration-like every merger-is different, a number of guiding principles apply across almost all integration efforts. They all revolve around a central question: Where do operations really need to be integrated, and where can the merging businesses simply carry on separately? The answer lies in a set of four decision principles:

Plan for ownership. Ideally, acquirers should launch their integration planning months before the deal is publicly announced. Many of the toughest integration decisions will be about people. Management should link all decisions tightly to the deal's investment thesis and to the synergies and cultural issues identified during due diligence.

Integrate quickly in critical areas. Carefully target areas for integration based on the deal's investment thesis. Mergers

Johnson Wax and DiverseyLever: Getting the four integration principles right
Morgan Stanley and Dean Witter: Selective integration
BP and Amoco: Addressing cultural integration early and proactively
Integration extent vs. investment thesis
Cultural integration's hard tactics
aimed at creating economies of scale require nearly seamless integration. But mergers aimed at extending product, customer or geographic scope require only selective integration. Move quickly on the things that matter most.

Put culture high on your leadership agenda. Leaders of merged companies need to retool their corporate culture in a way that's consistent with the deal's investment thesis. Whatever integration plan you choose, you need to use hard tactics-organizational structure, compensation incentives and the division of decision-making authority-to address cultural integration.

Maintain firepower in the base businesses. Mergers can exert a gravitational pull on employees. Keep most of the talent focused on minding the store. Devise a plan to retain key employees and protect the customer base.

Effective integration generally ranks as the single most important factor influencing the success of a deal. It can make or break a deal's trajectory. Yes, integration is hard. But companies can vastly improve their odds of success by moving quickly only on the few things that really matter. And a sharpened focus will free the rest of the company's talent to concentrate on keeping the base businesses running smoothly.



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