If two join together, the expectations increase enormously. As soon as these expectations are not met, the search for the guilty person begins. A Hewitt survey questioned top managers from 300 companies on the topic of Merger & Acquisition and came, among other things, to the following conclusions:
75% of the goals and expectations have not been achieved.
12,5 billion Euros have been lost during 2 years due to this.
92% of the issues have been caused by cultural problems, loss of key performers, higher time requirement and insufficient attention to the employees.
(Quelle: Hewitt Studie: “M&A Transactions and the Human Capital Key to Success”)
The list of the failed Merger & Acquisition projects is quite long. Daimler & Chrysler, Adidas und Salomon, Time Warner und AOL are just few examples. Chances and synergies have often been overestimated, risks have not been noticed or simply underestimated and also in the integration phase a lot of devastating mistakes have been made. Moreover, quite too much money has been spent. The list is quite long.
- Start such complex project by making a structured procedure plan
- Analyze the different business models and determine the actual synergy potential
- Compare the processes and structures and develop new suitable solutions
- Set attainable goals and develop adequate strategies
- Position your new brand and develop an adequate implementation program
- Support your employees on the way of the change
For that you can use the holistic and sustainable approaches from ScS. With our colleagues, tanked with interdisciplinary knowledge, we turn your Merger & Acquisition project into a success story.
Management of Merger: The supreme discipline from managers
Where does the terminology Merger & Acquisition come from?
(Please open the sections to read more.)
Merger & Acquisition describes the two main categories of the corporate transaction. The term merger refers to the process when two or more independent companies join together. When buying a company (Acquisition) it does not change anything for the existence of the purchased company first. A corporate acquisition without integrations does not lead to liquidation of the purchased company, but normally to group formation or to extension of an existing group by the purchased company.
- Economies of scale
- Efficiency gains resulting from the grown company size by decrease in unit costs
- Economies of scope
- Benefits from the cooperation of the different production areas
- Economies of vertical integration
- Benefits from sustain improvement of the value-added chain
- Diffusion of know-how
- Expansion by e.g. trademark rights, patents or qualified employees
- Gaining market position and new market shares
- Gaining of e.g. new products and established brands
- Increased competitiveness
- Prevention of disruptions
- Gaining know-how in Research & Development
- Financial improvement, better free cash flow, lower financing interest, increased revenue
- Benefits from more advantageous tax treatment
If two or more companies merge there are more integration tasks and challenges to expect than in acquisition projects. These challenges and changes must be recognized, assessed and managed.
Does Merger mean Change?
Merger projects always bring with it changes for all involved parties independent regardless of whether it is a fusion of equivalent companies or whether the one partner has taken over the other. The change meets both sides. It is obviously clear that the acquired one has to change but the acquirer has to adapt to the partner´s specific requirements and circumstances as well. An inevitable consequence is often the change of business models, what forces all parties to adapt their way of business. That means active Management of the activities in merger projects regarding personnel, equipment, production and external representation.
The greatest danger in times of change is not the change itself, but more being guided by yesterday’s logic. Peter F. Drucker, pioneer of the modern management
Probably the largest ever merger of the modern age was surely the German reunification. The consequence was significant changes for all citizens of both German parts, for example in terms of infrastructure, corporate landscape or of the markets in general. The external relations of the state and the loss of cultural identity within the country are topics the citizens had been dealing with for a long time. Even if there are things, which could have been done better and in a different way, the German reunification still presents a real unique success story.
Why did it work?
Because the people wanted it! Some more, some less, but all wanted it at least so much that creative solutions at all levels, for all topics and at any time could be found and implemented.
When companies or even just divisions join together it always leads to similar challenges and obstacles. It is completely irrelevant, what the motivation for the merger or the acquisition was, e.g. whether extensions of business models, acquisition of skills, common positioning, integration of startups or takeover of a competitor. In the end, what it comes down to is managing change across company divisions and departments.
What must be managed?
The trend becomes a fact. The board´s decision leads to a range of tasks for the involved partners. These have to be managed during the day-to-day business. Furthermore, different customer bases and product views need to be aligned. In that context, it is crucial to focus on the customer benefit (customer value chain) to avoid any frictional losses.
Usually, this involves all parts of a company. Besides the usual topics like reorganization of structures, integration of new managers, establishment of clear responsibilities the following questions, among others, have to be answered:
Which financial transactions have to be managed? How is it possible to measure the success of mergers or acquisitions? Which cost structures need to be adjusted? Which reporting lines have to stay? What requirements do the departments have for the IT? What synergies are achievable? How to find and use potential cost savings? …
Which campaigns have to be run? What should be offered to customer in the future? How should the customer see the „new“ company? What strategy is planned for the whole company? Which measuring instruments are reasonable and necessary? Which old product groups, business units or fields should be cut out? What kind of expectations exist of the other company parts? …
Which structures have to be adapted? How can uniform and standardized position descriptions be established? Which remuneration systems need to be changed? What change management processes have to be started? How does the common culture look like? Which support is needed for the other parts of the company? …
How should the common customer communication look like? How should all the different call centers be aligned (if available)? How is it possible to realize a consistent image? Which synergy potentials can be realized (e.g. Output Management, Billing, Accounts Receivable etc.), What requirements do exist for the IT? …
What are the requirements from the other units? How is it able to achieve all synergy expectations? Which systems need to be consolidated? What should the new IT architectures look like? How does the future common IT operations look like?
Which complex products can be simplified? Which production steps should be connected? What synergies can be achieved in the supply chain? Which joint products are possible? Where are the monitoring points to control the core business? Do any areas need to be outsourced or insourced? …
How should be managed?
- The obvious goals are recognized and monitored quickly
- The main features of the Merger have been determined and described during the negotiations and meetings
- The goals of the individual organizational units are derived from the overall goals
- The common rules are defined clearly and precisely (keyword: Governance)
- Suitable KPIs for the goals are determined so that the clear performance measurement is ensured
- The KPIs determine the success of the measures and do not just measure the productivity.
Attention is focused on the important and meaningful KPIs because (In this context less is more and retains the overview.)
In the age of digital revolution, introduction of new technologies with ever shorter implementation times and not to forget the customers and the financial markets which place ever increasing requirements it is necessary to perform all tasks concerning the Merger & Acquisition projects in a fast and smooth manner. This makes high demands on the efficiency and effectiveness of the whole company especially during the cost reduction programs, which are run parallel.
We have analysed this complex situation, discovered and determined the success-critical factors and topics and developed comprehensive solutions from this knowledge. We give new impulses and see ourselves as a connecting link between the different departments of a company to ensure a comprehensive and sustainable implementation of the vision.
We repeatedly experience that a lot of important activities are simply abandoned because a lot of companies focus on achievement of quick wins. It also often occurs that strategies are not implemented in a sustainable way because there is a lack of budget although success stories are reported.
“The greatest danger for our business is if somebody invents something what will completely change the rules in our industry.“ Bill Gates
Tackle this risk Bill Gates identified by taking advantage of our comprehensive skills and enormous speed. You get a competent and agile partner with cross-sector experience in big international corporate groups as well as in medium-sized companies who is ready to develop the right and exclusive solution for your business.
We are completely independent of IT providers or any other partners and do not follow any rigid rules. This allows us to analyze your entire situation without any prejudices, influences or barriers.
Our patented Smart Analysis allows us to involve cross-business and cross-discipline topics and provides the best individual solutions. Our experts are always driven by the latest trends but do not loose sight of the old proven procedures, methods or solutions
Thanks to our ‘Generic Consulting Approach’ you can arrange individual exit points in advance.