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Poor post-merger integration is one of the primary reasons acquisitions fail. Must have adequate planning, timing, attention to detail as well as contingency plans. . Post-merger Integration. Acquisition posture. Methods for motivation and integration.
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Poor post-merger integration is one of the primary reasons acquisitions fail. • Must have adequate planning, timing, attention to detail as well as contingency plans. Post-merger Integration • Acquisition posture • Methods for motivation and integration • Types of integration approaches
Post-merger Integration • Acquisition Postures Contested Situation Collaboration Rescue Raid Cooperative Adversarial
Post-merger Integration • Acquisition Postures Rescue Contested Situation Collaboration Rescue Raid Cooperative Adversarial • Rescue • Financial salvage operation • Firm has significant weaknesses • Incumbent top management generally leaves (had their chance). • Loss of leadership • Target firm employees threatened by layoffs, sell-offs etc. • Generally good cooperation (target firm employees are still part • of the vanquished firm). • Primary issues - Rebuild corporate self esteem - Well-defined sense of direction
Post-merger Integration • Acquisition Postures Rescue Contested Situation Collaboration Rescue Raid Cooperative Adversarial • Rescue • White Knight Scenario • Decisions based on expediency (severe time pressure) • Second guessing (seller), buyers remorse (buyer) • Significant post-merger surprises • Post-rescue must determine how the firms will interact and • conduct compatibility studies of the different cultures, • processes and procedures. • Chevron rescue of Gulf oil from T. Boone Pickens.
Post-merger Integration • Acquisition Postures Collaboration Contested Situation Collaboration Rescue Raid Cooperative Adversarial • Collaboration • Acquirer generally does not use heavy-handed tactics. • Diplomacy and goodwill are critical. • Often difficult because of poor follow-up management. • Generally less post-merger drift (sag in productivity, loss of morale, etc.). • American Airlines acquisition of TWA.
Post-merger Integration • Acquisition Postures Contested Situation Contested Situation Collaboration Rescue Raid Cooperative Adversarial • Contested situation • Conditions • One party has a strong interest in the deal • Two parties want very different deals • Competitive bid situation • Less of a feeling of a victor and vanquished than in “raid” situations. • Competition can lead to increased ambiguity • Significant post-merger drift. • Example: Walmart, J. Sainsbury PLC, and William Morrison Supermarkets PLC competitive bids for Britain’s Safeway PLC.
Post-merger Integration • Acquisition Postures Raid Contested Situation Collaboration Rescue Raid Cooperative Adversarial • Raid • Adversarial climate is at its peak (maximum resistance by target firm). • Intense emotional battle • Rumor mill operates in both firms. • Target firm generates antagonism among its employees • toward the raider (move will hurt employees, morale, and • create an uncertain future). • Rally around management and become more cohesive in • the struggle against a common enemy. • IBM’s hostile takeover of Lotus Development Corp.
Post-merger Integration • Acquisition Postures Raid Contested Situation Collaboration Rescue Raid Cooperative Adversarial • Raid • If the takeover is successful it does not end the impact of residual antipathy. • Employees of the acquired firm may find it difficult to make the • psychological shift from conflict to brotherhood. • Battles may continue for years (subtle resistance, guerilla • warfare). • Incumbent management concerns (recant position of defiance • or resign).
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