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Mastering the art of merging: key strategies for successful integration

Elevate the outcomes of a merger through a relentless focus on value drivers, stakeholder engagement, and adaptive leadership.

AT A GLANCE

  • Strong leadership with experience in integration is crucial to steer the complex process of merging two organizations and ensuring alignment with strategic goals.
  • Keeping a steadfast focus on the merger’s primary value drivers is key to realizing the envisioned benefits.
  • Addressing the human aspect of mergers, from retaining essential personnel to fostering a unified culture, is vital for a smooth transition and long-term success.

Integrating with another organization can make a step function change in a company’s performance. Whether it’s an outright acquisition or a “merger of equals,” companies believe that they can create more value by joining forces than by moving forward alone.

The latest attention-grabbing headline of early 2024 is Hewlett Packard Enterprises’ planned merger with Juniper Networks. Pundits are already predicting either success or failure. History is littered with successful mergers such as Google and Android and massive failures like AOL and Time Warner. Many fail due to unrealistically optimistic expectations driven by overvaluations.

However, many also fail due to poor integration execution. Once the excitement of the big announcement has worn off, somebody needs to sit down and figure out how to stitch the two organizations together. Merging two organizations together is tough, messy work. Here are a few suggestions on how to maximize your potential for success.

Have good, strong leadership

You need someone leading the integration who knows how to manage both the high-level aspects of the program as well as the detailed minutiae. Due to staff constraints and expertise, this may be someone from the outside, but it doesn’t have to be if your company has been through many mergers before and has developed the expertise in-house.

However, wherever this leader comes from, they need to be unbiased towards either organization and treat everyone based on their merits, not just who they currently work for. If you do look for help outside your business, don’t just Google “integration consultants.” The individual running the show needs experience-based proficiency to understand how all the pieces fit together.

They also need to establish a good team of leaders that cover all functional areas and keep things very structured. Finally, this leader needs to have easy access to and be respected by upper management. Many decisions will come up that need to be resolved quickly so things can continue moving smoothly. Being able to shepherd (and confront if needed) the executive team is essential to making that happen. Issues that fester unresolved will come back many-fold in the future.

Focus on the value drivers

Don’t forget why you merged in the first place. Was it to achieve cost synergies? To “buy” customers to improve cash flow? To merge complementary services that will function stronger or sell better when packaged together?

Whatever the case, don’t lose sight of the purpose you are undertaking this vast effort for. It’s easy to get caught up in building an exciting new organization and lose sight that some specific aspect needs to work or perform better in the new organization to enable some explicit benefit.

Understand the targets you need to hit across the various parts of the organization and ensure that your new design will meet the original objectives. And be sure to double-check yourself against these goals throughout the merger initiative to ensure you don’t stray from the original point of the whole exercise.

Execution matters

The excitement of the merger announcement will fade, and the real work to capture the value identified will begin. Post-merger integration work is tough and can be emotional. It often gets into painful levels of detail and requires a large amount of coordination among a potentially unruly group of stakeholders. Individual customers, products, and services must all be evaluated and carefully transitioned to the new organization. Detailed plans, trackers, and status monitoring/reporting will keep things from falling through the cracks. Typically, all of this must be done with a team of individuals from both companies with varying levels of buy-in and engagement in the process.

As mentioned previously, strong post-merger leadership and an unrelenting focus on the “why” of the integration are critical. Execution success can be, in some ways, measured by the level of executive management involvement in the integration work. A well-executed integration will create little “noise” and divert management attention elsewhere. One of the best compliments the integration team could get is that executives forget they are in the midst of an integration.

Challenge the status quo

In an integration project, when faced with a design decision on how the new company will operate, you have the option of simply picking the way one of the two companies currently does things. Choosing the best of the two options is straightforward. This approach might yield the best of two choices, but it doesn’t mean it always yields the absolute best way of operating.

There is likely another option of not using the current process of either company but rather putting a little more effort into the merger and using this opportunity while the “hood is popped” to come up with a new, better way to do things. To accomplish this, try using what we call a Blue Team. The nomenclature of blue is important. Historically, Red Teams are used to poke holes in things, such as government intelligence or military performance. The concept of the Blue Team is also to challenge ideas, but more importantly, to serve as a panel of experts to collectively figure out a better way to do something. It’s one thing to say something isn’t good; it’s quite another to suggest a better way to do it. A Blue Team comprised of cross-functional experts from both organizations working together can often collectively devise a better way of addressing a particular issue or integration challenge.

Don’t forget the people

A brutal fact of many mergers is that jobs will be lost or at least changed. Headcount reductions are often necessary to hit financial objectives. But there is a right way and wrong way to address the people aspect of a merger. 

Do

  • Make sure you keep people who are critical to the integration itself and incent them to stay as long as needed in a measurable way that keeps them engaged. I’ve seen organizations let go of critical technical resources too early in the merging process, and the resulting effort/cost to try and figure out what that resource knew ends up far surpassing any extra expense that might have been gained through freeing up their salary. 
  • Take care of and retain the best employees regardless of which company they are from. The merged company will require the best collective thinking from the two original companies.

Don’t

  • Assume people will remain motivated if they know they are being ushered out or moved into a role they don’t want. They might still technically be on the payroll, but they won’t have any motivation to make sure the integration goes well. Let a culture of the acquiring and acquired companies permeate the integration. While the notion of a “merger of equals” is often not true, what is true is that allowing one party to dominate the integration completely will create tension and thrust a hierarchy onto individuals who already feel vulnerable. All voices should be heard.

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By Kyle Kidd
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