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Prelims

Kirsten Meynerts-Stiller Christoph Rohloff

Post-Merger Management

ISBN: 978-1-83867-452-6, eISBN: 978-1-83867-451-9

Publication date: 8 October 2019

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Meynerts-Stiller, K. and Rohloff, C. (2019), "Prelims", Post-Merger Management, Emerald Publishing Limited, Leeds, pp. i-xxiii. https://doi.org/10.1108/978-1-83867-451-920191001

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Emerald Publishing Limited

Copyright © 2019 Schäffer-Poeschel Verlag für Wirtschaft – Steuern – Recht GmbH

Half Title Page

POST-MERGER MANAGEMENT

Title Page

POST-MERGER MANAGEMENT

Value Creation in M&A Integration Projects

Kirsten Meynerts-Stiller

Christoph Rohloff

Original German language edition:

Kirsten Meynerts-Stiller/Christoph Rohloff: Post Merger Management. M&A-Integrationen erfolgreich planen und gestalten. 1. Auflage 2015

(ISBN: 978-3-7910-3399-0) originally published by Schäffer-Poeschel Verlag für Wirtschaft, Steuern und Recht GmbH Stuttgart, Germany. Copyright © 2015.

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First edition 2019

© Schäffer-Poeschel Verlag für Wirtschaft – Steuern – Recht GmbH

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A catalogue record for this book is available from the British Library

ISBN: 978-1-83867-452-6 (Print)

ISBN: 978-1-83867-451-9 (Online)

ISBN: 978-1-83867-453-3 (Epub)

List of Figures

Figure 1.1 Terminology Shapes Reality
Figure 2.1 M&AWaves
Figure 2.2 Degree of Concentration by Sectors
Figure 4.1 Integration Excellence as a Meta-competence
Figure 6.1 The Three Classic Merger Phases
Figure 6.2 Central Tasks in the Merger Transaction and Integration Phase
Figure 6.3 Information: From Conscious Incompetence to Sub-conscious Competence
Figure 6.4 How the Purchase Price of an Acquisition Is Calculated
Figure 6.5 Management Processes in the Merger Phases
Figure 7.1 Transition from the Transaction Team to the Integration Team
Figure 8.1 Activities between Signing and Closing the Deal
Figure 9.1 Escalation of Expenditure in the Case of Asset Deals and Share Deals
Figure 10.1 Differences in Attention Curves
Figure 11.1 The Integration Diamond
Figure 11.2 Motives and Objectives behind M&A Activity
Figure 11.3 Link between Acquisition Strategy and Depth of Integration
Figure 11.4 Fact-based, Customer-Orientated Approach
Figure 11.5 The Marketplace and the Customer as the Starting Point
Figure 11.6 Required Strengths and Capabilities
Figure 12.1 Striking the Right Balance in the Integration Process
Figure 12.2 The Four-field Approach to Integration
Figure 13.1 Project and Line Organization
Figure 13.2 Staffing the Steering Level of Integration Projects
Figure 13.3 Staffing the Project Organization from the Line Organization
Figure 13.4 Important Fields of Activity in Integration Work
Figure 13.5 Value Drivers Model
Figure 15.1 Work Assignment Form for a Work Package (WP)
Figure 17.1 The Change Curve
Figure 17.2 Parameters in Transformation Processes
Figure 17.3 Eight-step Model of Change Success
Figure 17.4 Example of a Change Architecture
Figure 18.1 The Iceberg Model
Figure 18.2 Deep-seated Cultural Models
Figure 18.3 Different Cultural Typology Models
Figure 18.4 Possible Results of Cultural Type Analysis
Figure 18.5 Results of a Cultural Analysis
Figure 19.1 Fields of Action for Providing Leadership Support in Integration Processes
Figure 20.1 Early Orientation Through Strategic Development
Figure 20.2 Mapping Out Joint Integration Goals
Figure 20.3 Strategic Development as a Driver of Merger Integration
Figure 20.4 Sample Overall Architecture Including Horizontal and Vertical Formats
Figure 21.1 Systemic Loop
Figure 21.2 Survey Format Based on the Kotter Model
Figure 21.3 Sounding Groups
Figure 22.1 Communication Aimed at Creating Reality
Figure 23.1 HR in Integration Processes
Figure 24.1 IT Integration Goals as a Function of the Business Case/Type of Acquisition
Figure 24.2 Decision Matrix for IT Integration Processes
Figure 25.1 Need for Improvement in Merger Competence – Broken Down by Business Function
Figure 25.2 Complementary and Overlapping Product Portfolios A and B
Figure 25.3 Possible Stages Involved in an Integration Project

List of Tables

Table 3.1 Relevant Studies on M&A Success Factors
Table 8.1 Merger Control. Pre-merger Controls and Transaction Bans—Duty of Investigation
Table 8.2 Review Periods for the German and European Cartel Offices
Table 10.1 Checklist for Day 1 Preparations
Table 11.1 Drivers of Acquisitions
Table 11.2 Differing Depths of Integration
Table 16.1 Fundamental Post-merger Risk Categories
Table 16.2 Three-stage Approach to Assessing Risks and Deciding on Measures to Be Taken
Table 16.3 Determining Net Risks
Table 17.1 Activities Aimed at Flattening Out and Shortening the Curve
Table 18.1 Different Categories of Artefacts
Table 18.2 Possible Cultural Differences (1)
Table 18.3 Possible Cultural Differences (2)
Table 21.1 Survey Formats
Table 23.1 Merging HR Systems and Processes

About the Authors

Kirsten Meynerts-Stiller founded Frankfurter Gruppe corporate development in 1998. Since then, she has consulted and supported many corporations in realizing demanding and complex change processes and post-merger integrations. She works on strategic, structure and process levels in a systemic combination with change dynamics and leadership issues.

Dr Christoph Rohloff entered business as managing director and business developer in the printing machine industry. Since 2003, Christoph has advised businesses on how to successfully realize complex change and transition processes. His focus is on risk-based analyses, management systems and post-merger integration excellence.

Preface

The idea behind the book

This book is intended for business integration managers. Its aim is to spread enthusiasm for one of the most challenging areas of entrepreneurial activity – the restructuring of two merged organizations to form a functioning, profitable business.

Merger integration competence covers all aspects of strategic planning, ranging from the management of complex organizational projects to the cultural work involved in change management and leadership development. The book offers practical answers to the many ‘how to’ questions relating to implementation while also explaining the broader M&A context in which integration projects are rooted, this being of crucial importance for assessing the chances of realizing synergy potential as well as evaluating the integration risks.

Merger integrations are very special projects: they pose an enormous challenge to the organization in general and the integration managers in particular. Generally speaking, they are fraught with over-inflated expectations of making rapid synergy gains; moreover, they are laden with pitfalls inherent to complex organizational change and charged with emotion as well as being influenced by socio-psychological dynamics.

This complicated situation poses risks, and it is no surprise that many merger integrations turn out to be botched jobs. It is not uncommon for managers to lose sight of the more modest targets and run through the integration process mechanically, without detecting the true nuggets among the new strategic business opportunities.

Up until now, many companies, including an increasing number of medium-sized businesses, have embarked on the ‘M&A adventure’ with insufficient preparation, often lured by the high level of standardization and the good consulting services available on the transaction side. From the transaction managers' perspective, M&A appears to be a professionally handled and easily controllable management field.

But things look quite different on the integration side once the deal has been closed: here, it is not uncommon for companies to rely solely on the relevant business function expertise, without clearly defined project structures or any in-depth experience of integration processes. The technical and cultural mergers run side by side with only loose links between them. The cost of integration is often underestimated, and insufficient resources are made available. Although corporations and ‘serial acquirers’ have an advantage over ‘occasional buyers’ as far as the standardization of integration processes and project structuring are concerned, integration management is still not yet fully professionalized in many corporations. Occasionally, this process is taken one step too far. Excessive standardization and process orientation leaves little scope for tailoring the integration project to the individual situation.

This is what inspired us to provide business integration managers with a kind of instruction manual containing the basic essentials for the successful organization of merger integration projects.

The know-how available with regard to post-merger management is currently still diffuse. Although there is now a good deal of literature, including a few standard works, on the M&A phenomenon in general, 1 post-merger management focussing on successful integration work and all its organization-specific facets is not the central theme. Merger integration also lags way behind transaction-related M&A subject matter as a further training and seminar topic in university and executive education. Increasingly, however, international conferences are being devoted to this subject, 2 and, e.g. within the German Federal M&A Association (Deutscher Bundesverband M&A) there are expert groups specializing in merger integration work.

Individual case studies on particular aspects of integration 3 , e.g. the study of the merger between Daimler and Chrysler or between Dresdner Bank and Commerzbank, are of special interest, as they provide valuable insights into the challenges posed by large-scale integration projects. 4 Empirical analyses, often carried out by the big consulting firms, are frequently limited to assessing deal performance and identifying the key factors in success or failure. The risk study by Gerds/Schewe goes one step further, using its findings to compile practical tips on how to organize due diligence with a view to making merger integration as successful as possible (Gerds & Schewe, 2009).

It is nevertheless important to note that every merger is unique. As integration consultants and authors of this practice-based manual, we are hence unable to provide a universal guide to all conceivable integration constellations. Based on our own observations and those of our fellow consultants as well as an analysis of the existing literature, it is, however, possible to identify certain factors in the planning, organization and methodology that have greater bearing than others on the success of merger integration projects.

In this book, we aim to pool the merger integration know-how already available, close at least the most important gaps in the skill and knowledge base, demonstrate how integration can succeed, and provide a candid overview of everything that needs to be done. The challenge of the book format lies in having to depict the synchronicity and interdependence of numerous events and activities in a sequential manner.

The increasing company demand on the consultancy market for professionalization in post-merger management stems from the pressure to minimize the risk of failure in implementing mergers in the light of increasing transaction frequency. This phenomenon is comparable to the process that has led to change management being viewed in a different way and gaining widespread acceptance as an essential component and success factor in organizational and change projects. Back in the 1980s and 1990s, companies faced massive internal pressure for change in order to improve the efficiency potential of their own organizational structures, processes and IT systems. It was only by professionalizing internal change processes within the framework of change management, which has since become a generally recognized practice, that companies were able to achieve this efficiency internally. Professional post-merger management competence is following this trend on account of the increasing necessity to achieve and maintain significant synergy effects in merging organizations.

This book is aimed at a wide range of target groups within businesses:

  • Project managers: Leading project managers and integration managers are generally nominated on the basis of their specialist role. Alternatively, experienced organizational project managers are made available by the key departments, such as HR or Organization Development. Many corporations pool all their integration experience in central PMI communities and specialist departments. These experts are often consulted for support and advice with the operative implementation of the integration at local level.

  • Project participants: Responsibility for the implementation of a sub-project lies mainly in the hands of specialist staff and executives from middle management. For many, a forthcoming merger means extra pressure on top of their normal workload, often with little practical integration experience.

  • Decision-makers responsible for mergers: The top-level management staff and the head of department responsible for the deal in question generally have experience in handling transactions and have already assisted with or been in charge of a number of acquisitions. In their case, an in-depth understanding of integration dynamics and how to shape them can provide valuable information for the transaction phase; in particular, it facilitates a realistic assessment of the volume of resources needed for integration (and requiring costing), as well as raising awareness of the need for management staff to stay focussed on the integration project over its entire duration – generally a matter of several years.

Our readers will have to grapple with some quite challenging perspectives. The increasing complexities of organizational reality cannot be blocked out or trivialized, system theory approaches can facilitate a better understanding of the dynamics involved and greater proficiency in managing permanent conflicts of interest when conducting merger integration can help to put minds at rest.

At the same time, this book serves the very pragmatic purpose of providing concrete tools that have already proved their worth over the course of numerous integration processes.

We would like to thank all those who have taken part in our merger integration seminars as well as our consulting project contacts, who have assisted us in enhancing and perfecting many of the approaches discussed here. Our thanks also go to Christoph Stiller for his help in compiling the manuscript and charts.

Kirsten Meynerts-Stiller, Christoph Rohloff

Neu-Isenburg, April 2019

1

Müller-Stewens, Kunisch and Binder (2010), Jansen (2008) and Lucks (2013). An example from the English-speaking world: Davis (2012), Whitaker (2012), Galpin and Herndon (2007) and Lajoux (1997).

2

Example: The Thought Leader Global Integration Conference held annually in Amsterdam since 2011.

3

Example for the logistics industry: Bachmann (2008); for public bodies: Sommerrock (2009); for the IT industry: Popp (2013). Examples from literature illustrating individual aspects of integration for the field of HR: Scharfenkamp et al. (2002), Jaeger (2001), Geschwill (2000) and in greater detail: Krusche (2010); example for integration controlling: Bauch (2004); example for cultural due diligence Strähle (2004) and PMI cultural work: Palm (2012).

4

For the merger between Allianz and Dresdner Bank, see Große Peclum, Krebber and Lips (2012); for the merger between Daimler and Chrysler, see Grube and Töpfer (2002).

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