Name:-Shivendra Singh

Roll No-1208005653

MF0011 MERGERS AND ACQUISITIONS

6- Explain the factors in Post-merger Integration. Write down the five rules of Integration
Process.
Factors in Post-merger Integration
Some important factors that can decide the success or failure of a merger or acquisition are:
Due diligence: Thorough due diligence involves comprehensive analysis of the financial position,
management capabilities, physical assets and intangible assets of the target company. However, it
can result in failure of the project if done badly.
Financing: Manageable debt levels should be ensured.
Complementary resources: Ideal conditions for a merger are when the primary resources of the
acquiring and target firms are somewhat different, yet simultaneously supportive of one another.
Therefore, companies should seek for such a situation.
Friendly vs. hostile acquisitions: Friendly acquisitions tend to create greater economic value. A
hostile acquisition can reduce the transfer of information during due diligence and merger
integration, and increase turnover of key executives in the firm being acquired.
Synergy creation: Four foundations for creation of synergy are strategic fit, organizational fit,
managerial actions and value creation.
Organizational learning: All stakeholders should participate in the acquisition process to ensure
that relevant knowledge is spread throughout the firm, and is not lost if anyone involved leaves.
Information gained should also be recorded and its impact on the process studied and utilised.
Focus on core business: The lesser the common factors in the combining firms, the more
magnified are cultural and management differences. This in turn restrains the sharing of resources
and capabilities. The advantages of financial collaboration will not be sufficient to negate the
disadvantages of diversification between misaligned partners.
Five Rules of Integration Process
1. Starting the post merger integration (PMI) process early: The integration effort should start
much before the deal is closed and the contracts signed; in fact to this extent, the expression post
merger is itself a misnomer. It is essential to consider PMI issues at the very initial stage and plan
meticulously while choosing the target company. The main advantage is the preparedness for
potential risks and challenges. It also helps in evaluating the target companys culture. This is also
confirmed by the findings of Parenteau and Weston (2003).
2. The integration manager: A due diligence team (from areas like HR, finance, tax, technology
etc.) and one or more top managers are responsible for the acquisition. This team, which is
involved in the acquisition, achieves the best insight into the target company. However, the team is
either dissolved or moved to the next acquisition. The manager of the acquiring business unit has
the charge of running his own units. His main focus will be on operating results and customers and
not on integrating cultures, processes and people. GE Capital was one of the first companies to
realize this problem. To counter this they introduced the concept of an integration manager, a
dedicated position filled by an executive relieved of his regular duties for up to a year.
3. Speed: If the integration takes place faster, the company will start making profits from the
predicted collaboration earlier. The valuable resources that are engaged in the internal
reorganization should be released as soon as possible. But as A.T. Kearney discovered there is
no absolute merger integration speed. The integration speed should be prioritized based on what
steers competitive advantage most and therefore results in selective integration speed ). Apart from
customers, nearly all the companys stakeholders will respond positively to speed. This is because

a fast process reduces the impact of uncertainty of what is to come after the merger. This stands
true for both a companys suppliers and for its employees.
4. The people problem: A successful merger is the one which retains the key people of both the
companies. Efforts should be made to recognize and identify key managers, understand their
motivations and accordingly act upon them. Measures like long-term stay bonuses that are tied
to some performance measure will generate a positive atmosphere which in turn will improve the
chances of retention.
5. Keeping culture high on the agenda: All companies are different in what they do and the way
they get things done. This is founded in what is called the corporate culture. It has observable
and unobservable behavioral rules, norms of work organization and philosophies which help in
forming the internal hierarchies.