M&A integration usually incurs organisational challenges: some planned, others unforeseen. As with any transformational project, putting great effort into the due diligence, planning and diagnostic phases will pay dividends when it comes to executing your integration plans — forewarned is forearmed. Having said that, we recognise that circumstances are prone to change, so we have detailed our advice on how best to steer the ship through difficult periods of M&A integration.
Restructuring and redundancy are common outcomes of M&A. Organisations may have to downsize their workforce as part of the transaction due to various reasons, such as operational flexibility, economic uncertainty, or simply for cost reductions. Before building redundancy into your integration plan, one should first carefully consider the skill and knowledge requirements for your combined company to plan for a successful transition. Redundancy undoubtedly creates heightened staff anxiety, and employment risk may lead people to search for jobs elsewhere, so consider the cost-benefit trade-off and whether at-risk employees can be redeployed elsewhere.
If redundancy is unavoidable, ensure you are clued up on legislative requirements for your region (e.g. European TUPE mandates); it is advisable to take legal advice from specialist employment solicitors. It is imperative to handle the process with as much sensitivity and professionalism as possible. Try to understand the underlying psychology of your employees to work out how best to support them through this destabilising experience. You should deliver the news in person where possible, prepare for an influx of questions, and guide them throughout the consultation process (if applicable) with transparency. For many, a job provides more than just a paycheque; it can be a crucial part of the colleague’s social life and sense of identity. If you are able to recommend any redundant employees for a new position elsewhere, that can be a win-win situation for the employer and employee by holding onto a committed team-player who understands your organisation well.
Many M&A challenges are rooted in differences in company culture. Cultural misalignment can disrupt ways of working and can hamper leadership decision-making. Ideally this should be managed in advance: organisations with clashing cultures will not make for suitable M&A partners, so this should be discussed during transaction negotiation. Completing a cultural assessment of both companies will provide insight into the fabric of both company values, as well as gaps and potential future roadblocks. Important considerations include: how decisions are made, adoption and complexity of processes, level of staff autonomy, etc, so make sure you prepare plenty of culture-related questions for your target business.
In advance of closing your deal, you should clearly define your desired combined culture that fits with your overall business strategy. This will make it easier to communicate the wider vision to your employee population. We recommend establishing cultural leaders with dedicated resources to manage throughout the change process. These individuals, with representation from the target side, must have great knowledge and sphere of influence, such that their commitment and active involvement in the cultural change programme has a deep and lasting effect. This team of leaders can help to mitigate any cultural differences and set the tone going forwards, which will trickle down into the entire organisation.
Finally, it is common practice for buyers to overvalue M&A synergies, which typically arise from economies of scale, best practices and sharing capabilities. When calculating potential synergies with imperfect information in the early pre-deal stages, a tiny margin of error can have a considerable impact on your integration KPIs. As with cultural alignment, forward-planning is key. As organisational leaders, we advise you to be bearish when reviewing top-line synergy estimates, acknowledging potential dis-synergies (e.g. loss of customers) and over-estimating one-off costs (e.g. IT platform consolidation), such that your projections more closely compare with reality. This will help make your integration targets more tangible and achievable, which will please shareholders.
As critical as due diligence and planning stages are, we must accept that challenges will inevitably arise at some point during the integration programme. All we can do is gather as much information in advance so that we are able to tackle them head on, and mitigate any long-lasting impacts.
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