Twenty Questions for Every M&A: Improving Postmerger Integration Performance

This note is used in Darden's Postmerger Integration elective. The authors present a guide to help managers prepare for integration challenges and allocate integration resources more efficiently. Although simple at first glance, addressing 20 yes-or-no questions can lead to fruitful in-depth conversations that provide a sound foundation for successful PMI planning and execution. By answering these questions in open dialogue, PMI managers and senior executives will expose the potential weaknesses in an upcoming merger and highlight the arenas in which detailed planning is not only warranted but fundamental. Excerpt UVA-S-0226 Sept. 5, 2013 Twenty questions for every m&A: IMPROVING POSTMERGER INTEGRATION PERFORMANCE It is clear from the numbers that mergers and acquisitions (M&A) are difficult. By one estimate, about one-half fail to create shareholder value and around one-quarter actually destroy it. Yet despite this dismal track record, a 2011 McKinsey survey of senior executives noted that a majority of respondents still believe M&A remains necessary for growth. Much of the difficulty around acquisitions surely arises from the fact that every M&A is different, and most require a tailored, rigorous integration process to be successful. To price a deal right and successfully integrate the acquired business requires understanding what factors will make a given acquisition difficult and what resources the acquirer will need to tackle them. As the results show, many companies fail to do this successfully. Unfortunately, many of the firms that are considering M&A appear unprepared or inexperienced. In fact, a majority of the survey respondents noted that they do less than one acquisition a year, while just about one-half do not believe they have the required people or organizational resources to meet their M&A aspirations and only about one-third have dedicated integration teams. Thus it is not surprising that, since these integrations can require complex resource allocation decisions around how many employees, which specific employees, and what resources should be dedicated to the integration process, many fail to create value. . . .