The process of post-merger integration

Steps in the process of post-merger integration (PMI)

The process of post-merger integration (PMI) should have already started when the M&A strategy was being determined. Ideally, it is advisable to have standards and procedures in place for post-merger integration long before you actually do an integration. The high-level integration plan and business case need to be in place as a standard procedure in the business. As part of the business, case synergies need to be determined in an abstract form and they need to be allocated to the various workstream owners.

Overview of the main steps in the process of post-merger integration (PMI)

• Phase 1: M&A strategy
• Phase 2: due diligence
• Phase 3: pre-close specification
• Phase 4: post-merger integration kick-off
• Phase 5: post-merger integration long term (after 6 months)

Phase 1: post-merger integration (PMI) M&A strategy

It may sound surprising, but for an organization of a certain size, (for example revenue > 300 million euros or more) the post-merger integration planning should be included as a standard procedure for companies seeking to do an acquisition. Not only to be prepared for an acquisition or merger but also to be clear on what benefits an acquisition could bring. This can help the organization in improving its current position and strategy and understanding the business drivers and possible synergies better. These are the items that normally need to be prepared as part of the M&A strategy phase:

• Corporate M&A strategy (high-level picture)
• Business case and synergies
• M&A workstreams (and owners)
• PMI (post-merger integration) processes

Phase 2: due diligence with a sharp focus on post-merger integration

In the due diligence phase, the assumptions of the M&A strategy are tested. Also, the available plans of the post-merger processes are checked and updated for accuracy. The workstream owners perform their part in the due diligence process. They check and sign off on the synergies that they are responsible for and agree on a calculation method with the PMI integration managers or the financial team of the buyer. These are the main components of the due diligence (DD) process with a focus on post-merger integration preparation:

• Normal DD (commercial, financial, legal, others)
• Confirm business case
• Recalculate expected synergies based on DD data
• Confirm workstream owners for post-merger integration projects

Phase 3: pre-close specification

The pre-close specification is a separate phase that is specifically put in to prepare for an optimal PMI (post-merger integration) process. It appears in practice that companies that explicitly organize a pre-close specification phase have a more efficient post-merger integration process and gain significantly more synergies in the post-acquisition phase. These are the items that need to be reviewed before the actual post-merger integration process begins:

• Confirm business case and synergies
• Allocate and sign-off synergy responsibility to workstream owners
• Confirm workstream owners and allocated teams
• Specify post-merger integrations plans

Phase 4: post-merger integration kick-off

There are two stages in the post-merger integration process. The first post-merger integration phase is the one immediately after the closing of the transaction. This period can run up to 6 months. We want to differentiate between the two post-merger integration periods to stress that action is required from the first minute after an acquisition process. These are the items that need to be reviewed immediately once the actual post-merger integration process starts:

• Agree on PMI plan and process with the target company
• Make risk assessment and assign ownership
• Agree on business case with target management
• Agree on synergies with target workstream owners (partners)
• Start PMI workstream team integration

Phase 5: post-merger integration long term (after 6 months)

The integration process after a merger can normally run for many years. Hence, we feel that the integration plan needs to stick firmly to the agenda including after the actual merger or acquisition has been completed. These are the items that need to be checked after a period of 6 months or more following the start of the actual post-merger integration process:

• Monthly PMI workstream reporting
• Confirm integration of workstream level
• Review and evaluate integration

Information about the process of post-merger integration

Contact us for a free-of-charge brainstorming session and feedback on your acquisition and merger plans. We can discuss how a post-merger integration process can best be organized. We are open to giving you candid feedback about how to structure your post-merger integration process.