15 Tips to Ensure a Successful Post-Merger Integration

A successful merger depends on a well-planned post-merger integration (PMI) with careful preparation, planning, and execution. Burnie Group has successfully supported clients across various industries through mergers, acquisitions and integrations. Based on these experiences, we identified 15 tips for a successful post-merger integration to ensure that your integration delivers on expectations and runs smoothly.

1. Establish a strong integration management office
2. Implement proper integration governance
3. Develop a comprehensive plan for Closing Day and Day 1 execution
4. Design a comprehensive long-term integration plan
5. Build a comprehensive communication plan
6. Get roles and organizational design right
7. Clearly communicate how the deal will benefit clients
8. Manage legal requirements, regulatory rules, and sensitive data carefully
9. Track, monitor and deliver key sources of integration value
10. Align end-user technologies to ensure productive collaboration
11. Align technology infrastructure
12. Develop and implement a target application state
13. Develop an interim and target-state operating model
14. Leverage integration expertise in your investor group
15. Establish rigorous and effective change management

A successful merger depends on a well-planned post-merger integration (PMI) with careful preparation, planning, and execution. Burnie Group has successfully supported clients across various industries through mergers, acquisitions and integrations. Based on these experiences, we identified 15 tips for successful post-merger integration to ensure that your integration delivers on expectations and runs smoothly.

 Establish a strong integration management office

Successful integrations start with a well-run integration management office (IMO). Every PMI effort is a large project; an effective IMO leader will keep the project on track and executed. Therefore, the leader must have the necessary skills for efficient work with senior leaders in the organization, combined with an ability to dive deep into critical issues.

An IMO leader cannot succeed without a good team. The integration management office should have a team to support the integration, from planning and reporting to hands-on support of different integration workstreams. Ideally, these team members have previous experience with post-merger integrations and can hit the ground running. They could be either internal resources assigned to the integration project or external resources, such as consultants with PMI experience.

Implement proper integration governance

Once there is clarity about core PMI resources, it is crucial to implement correct integration governance. Integration governance ensures an integration stays on track, and everybody knows what to do.

Successful integration governance should include the following:

• IMO structure, including reporting lines and leadership roles
• Workstreams, including cross-functional and business workstreams
• Relevant meetings and their cadence, including regular check-ins with workstreams and steering committees
• Integration charters that include workstream objectives, responsibilities, and milestones
• Guidance on decision-making
• Risk management
• Reporting and tracking
• Data management

Everyone on an integration team must clearly understand their roles and responsibilities so they can work together to make the integration a success.

Develop a comprehensive plan for Closing Day and Day 1 execution

The foundation for a successful post-merger integration is built before Closing Day. Therefore, thorough preparation before publicly announcing an acquisition is a necessity. We define Closing Day as the day a deal is finalized and Day 1 as the first day of legal ownership of an acquired company.

A detailed plan of action should include a list of critical activities to complete for Day 1, which consists of the most urgent topics across priority pre-closing workstreams. Priority workstreams for Day 1 include Human Resources, Communication, Finance, Legal, and some aspects of planning for Technology, Operations, Sales, Research and Product Development.

Other components of best-in-class planning include identifying potential risks and mitigations and developing an hour-by-hour plan that carefully choreographs all the activities for Day 1.

We also recommend taking the time before Closing Day to design a high-level target operating model for the integrated company, including an interim state if needed. A target operating model will simplify messaging and communication and serve as a base for post-closing planning.

Design a comprehensive long-term integration plan

Most integrations are complex projects with a complete process that can take up to two years. The timeline for integration depends on many factors, including the acquired company’s size, complexity, and integration type.

Companies need a clear, long-term integration plan to guide post-merger integration. A robust integration plan addresses:

• The evolution of the company’s target operating model
• Key customer-facing functions, such as sales, service and support, account management, and marketing
• Internal functions, such as HR, Finance, IT, and Legal
• Technology topics, including infrastructure and applications
• The evolution of products and services, including pricing and offering
• And many more

Some integration elements can extend beyond a two-year timeline. With longer integration processes, it is crucial to set clear integration milestones and deadlines. For example, complex target operating models, systems consolidation, technology transformations, and contact center transformations can occur after the integration as part of the integrated company’s business-as-usual projects. Otherwise, an integration runs the risk of becoming a never-ending effort.

Build a comprehensive communication plan

Effective communication is critical before and during Closing Day and Day 1. We recommend developing a communication plan for internal stakeholders in both companies and external stakeholders, including clients, regulatory organizations, suppliers, and partners. Depending on the type of integration, there can be additional stakeholder categories, including analysts, investors, and the general public for public companies.

An aligned communication plan can include developing artifacts like press releases, CEO emails, employee FAQs, client emails and call scripts, and planning meetings and town halls with employee groups.

It is important to be proactive and get ahead of the news curve; few things are more detrimental to a PMI process than dealing with news leaks ahead of official communication.

There are four main options for building an integration communication team:

1. The company can use its communication team if the team has enough resources and relevant experience.
2. The company can leverage the communication resources of the investor group involved in the deal.
3. The company can hire an external communication firm.
4. The company can use an external consulting firm that is already supporting the PMI process as its communication team.

Proper integration communication is also crucial for effective change management. Read more about change management for integrations in success factor 15.

Get roles and organizational design right

Managing human resources (HR) effectively is critical for a successful post-merger integration. HR planning starts early, long before Day 1. It is crucial to understand the people driving success in the acquired company, including executives, leaders, top-performing salespeople, and subject matter experts.

After identifying essential resources, the next step is ensuring they are interested in staying with the integrated company. Conversations with key people include communicating a vision of their future with the integrated company, reworking their contracts, and showing how their careers will progress within the new organization.

At the same time, it is critical to identify people in both companies who are not integral to the future success of the integrated organization, such as those who are underperforming or not open to change. Integrating two companies offers a one-time opportunity to build a superior team from the best resources of both organizations.

Another major HR initiative is designing an integrated organizational structure. In most cases, the organizational structure is designed in a few steps. For example, a human resources team might develop an initial org design for Day 1 that impacts only the top-level reports and then completes a full org redesign later. In other cases, an organization might require an interim and a target state organizational structure.

The fewer org redesigns an integrated company goes through, the better. Each design shakes up an organization, which can make employees feel insecure and uncertain.

Clearly communicate how the deal will benefit clients

Customer experience is of monumental importance during an integration. Acquisitions can pose uncertainty for customers and may result in unexpected customer attrition. Companies can manage this uncertainty by drafting a clear and attractive picture of why the acquisition benefits the clients. It may include the following:

• Access to a broader range of products and services
• Availability of new capabilities
• Broader geographical coverage
• Improved pricing models
• A one-stop shop for different needs

It is important to decide the message’s tone and how and when customers should receive it, whether via email, video, personal call, or a combination of all three options. Proceeding with an integration without informing the client shows a lack of customer care.

Manage legal requirements, regulatory rules, and sensitive data carefully

Every integration includes sensitive aspects. When improperly managed, these aspects can jeopardize an acquisition and complicate future integrations. All integration teams should heed the legal team’s guidance.

Examples of legal requirements and regulatory rules include:

• Complying with all legal environments, including industry-specific and general regulatory requirements
• Carefully managing sensitive data, such as exchanging data before Day 1
• Following regulatory rules, such as non-compete regulations and voting intervals for public companies
• Handling intellectual property (IP) matters correctly
• Paying attention to communication language, such as using proper wording to frame the nature of integration and avoiding any derogatory comments about an acquired company

Some of the most critical rules before the Closing Day include keeping competitive information confidential, not negotiating as an integrated entity, and not influencing the other party’s plans.

Track, monitor and deliver key sources of integration value

Every successful integration must have a clear view of integration value sources and associated benefits. These benefits typically fall into different categories, such as:

• Revenue and sales synergies, including a higher market share
• Cost synergies, including efficiencies based on an increased scale
• Asset synergies, including optimization of a physical footprint
• Financial synergies, including tax optimization
• Access to know-how, including patent acquisitions
• Access to unique capabilities, including advanced technology and distribution networks

Once the integration management office understands the integration value sources, the next step is tracking benefits delivery. The IMO must align on its budget, decide how to measure the benefits, and establish a timeline for when the integrated company expects to realize benefits.

Benefits timing is often estimated too optimistically. Once the integration team starts reviewing contracts and conditions of termination, these timelines can shift. Factors that determine benefit timing include locked-in leases, high penalties for subscription cancellations, the timing for major initiatives, such as org redesign, and more.

The integration management office must share regular status updates about benefits delivery. These updates should include a clear visualization of progress for planned and delivered benefits.

Align end-user technologies to ensure productive collaboration

Choosing the right technology at the start of an integration is important because it significantly impacts the employee integration experience. The IMO should align on the following end-user technologies first to ensure productive work across both organizations:

• Email
• Employee directory
• Office and collaboration tools, such as Teams or Zoom
• Data storage and sharing, such as SharePoint/OneDrive, Dropbox, or Google Drive
• Proper security standards, including firewalls, anti-virus, encryption, multi-factor authentication (MFA), network security protection
• Access management
• Domain trust, especially if the acquiring organization wants to preserve the acquired company’s domains
• IT helpdesk
• End-user device maintenance

Align technology infrastructure

Many technology infrastructure elements are costly, such as physical data centres, backup and mirroring services, network infrastructure including advanced security services, mainframes and server landscape including associated operating systems and environments. However, technology infrastructure is commoditized today, resulting in less complicated and more affordable implementation. In addition, a merger of two companies often results in infrastructure savings. The companies can consolidate their data centers, resulting in savings while maintaining best security practices.

Sometimes technology infrastructure consolidations are complicated. For example, an acquired company might have dozens of data centers. In addition, depending on the industry, infrastructure elements, such as physical points of sale (PoS) in retail, can come into play. In these situations, an integrated company needs an infrastructure alignment plan that accounts for constraints. A complete infrastructure alignment and consolidation can take up to a year from the start of a merger.

Develop and implement a target application state

Choosing the right technology impacts the integrated company long after the integration is complete. Application alignment and consolidation are among the most complex aspects of an integration. However, they come with significant benefits.

Some application alignments are more common, such as consolidation of CRM solutions, human resources information systems (HRIS), general ledger solutions, or service applications, such as development and testing tools for IT. By contrast, the alignment, integration and consolidation of core business applications is the most complex part of application integration because these solutions are often home-grown, heavily customized and both employee and customer-facing.

Application alignment requires careful planning and execution. The alignment process typically involves the following:

• Understanding the existing current state, including business process support through applications
• Collecting business and technology requirements
• Deciding on the target application state: consolidation, migration to a net new solution, or integration of existing solutions
• Application development and customization
• Application testing and quality assurance
• Roll-out and data migration
• Extensive communication and work with both employees and customers, such as training
• Archiving and sunsetting legacy applications

Many of these initiatives are long-term activities that might extend beyond the integration timeline. Nevertheless, application alignment can help an integrated company reap substantial benefits.

Develop an interim and target-state operating model

The most successful integrations start with an initial view of the target operating model before the Closing Day and Day 1. By beginning with an initial idea of the integrated company’s structure, processes, technology, governance, customers, and employees, senior leaders can understand the benefits of the integrated company. The sooner a target operating model is designed, the sooner the integrated organization can move toward the target state and realize advantages.

In most cases, an integrated company cannot move directly to the target operating model state on Day 1. Instead, the company might implement an interim structure, particularly for the org design. In addition, other elements of a target operating model might also require an interim state, such as separate billing, invoicing, payroll, and benefits solutions for each company until these functions migrate to the same platform.

Leverage integration expertise in your investor group

Investors can offer additional resources for integrations beyond providing capital. For example, some investors, like private equity firms, are familiar with acquiring and selling their portfolio companies. Many PE firms already have a team that has experienced post-merger integrations. Consequently, they can advise on integration topics like communication, organizational design, target operating models, and interactions with regulatory authorities.

Establish rigorous and effective change management

A post-merger integration is a significant undertaking that results in changes that impact employees in both the acquiring and the acquired organization. Effective change management is essential for a successful integration.

A change management plan ensures that the leaders responsible for integration topics across their areas can drive change and act as change agents. A successful change management effort should include the following:

• A motivating and easy-to-understand vision and target state
• Frequent and clear communication
• Enablement of leaders through coaching and messaging
• Enablement of employees through training and idea capture
• Proper change management tools, such as tools to share feedback and visualize change

Stages of a successful post-merger integration journey

Some integration success factors are relevant in specific stages, such as the initial integration phases, while others are critical for the entire integration journey. The overview below shows which integration success factors are relevant for each integration stage. By tracking the success factors by stage, companies can stay organized and maximize the success of their integrations.

For additional post-merger integration support, Burnie Group’s experienced team can guide you throughout your journey. We look forward to discussing your integration plans with you and helping you achieve a successful post-merger integration.