Minimising Risks through Adaptive Planning During M&A Integration

Having a strategy that encompasses and addresses the uncertainties in the integration process can be valuable in achieving the ultimate goal of growth acceleration.

70-90% of mergers fail during the post-merger integration process according to a report by the Harvard Business Review. Attributing a rationale to this factual evidence is a gruelling task. The process of M&A integration is dynamic and involves combining the various functionalities of the two businesses to realise their utmost potential and deliver significant gains, with the ultimate goal of ensuring exponential growth in output and profits.

The path to a successful M&A integration strategy is a murky one. With multiple dynamic parts in function, it is challenging to bring into effect a fruitful integration, as the factors of risk and uncertainty associated with post-merger integrations are abounding. There can be multiple reasons to determine the failure or success, but a few statistically proven risks determined by Deloitte in a joint research effort with the University of Muenster are associated with M&A integration, namely synergy risk, structural risk, project risk, and people risk.

It gets tricky to make an accurate assessment of the synergy potential that a merger can generate. The reason for this is limited time duration and inappropriately stated KPIs. The sources, targets, and implementation speed of synergy actualisation are also factors that increas the synergy risk.?

Adding to it is the factor of structural disparity that is attached to the process of merger and acquisition integration. It includes within its domain the disparities in terms of management and organisational differences, along with differences in the business processes. A misalignment in the hierarchy levels and the functioning of the merging companies bring about a need for a complete redesign of the business process, which adds to the uncertainties associated with M&A integration.

The extreme uncertainties attached to the process take into account the people associated with the two organisations. The restructuring of the managerial level posts, the hiring of new employees, and other fluctuations in the process lead to the risk of people becoming despondent towards the companies. Productivity is also hampered due to stalled projects owing to the unpredictability of business decisions and an ambiguous approach to upcoming policy decisions.

The major root cause of all these risks and discrepancies in the process of M&A integration is the dynamism and uncertainties involved in the overall process. The only way to eradicate this aspect of uncertainty is by adapting practices and techniques that inculcate risks within the assessment before executing the post-merger integration.?

Following the Adaptive Route

The word uncertainty can be used synonymously with the business landscape, and the area of mergers and acquisitions is no exception. To combat this scepticism that prevails in the post-merger integration, the deployment of strategic plans that consider this aspect of ambiguity and follow the right planning approach to combat it is crucial. A study by Deloitte shows that inadequate implementation planning is the third most risky factor that leads to the failure of M&A integrations. So it is apparent that a rigid and universal planning strategy will prove ineffective.

An approach that encompasses the realm of uncertainties and unpredictabilities within its subject matter can be the smart set approach to mastering the art of successful M&A integration. Following an adaptive strategy is one such approach that can translate into a successful M&A integration.?

Breaking down the process of integration into multiple steps can help reduce the additional economic constraint that is incurred to ease the process of integration and make it simpler to identify the loopholes and rectify them at each step, in turn leaving little scope for miscalculations.?

It is of utmost importance to realise that the process of post-merger integration requires detailed and analytical deliberations in relation to the different activities and steps involved in the process of integration. To ensure the smooth functioning of the project, it is necessary to ensure that the team of delegations leading the way is carefully selected.?

A study by PwC reveals that successful integrations require strong project governance, including optimising the cost, time, and resources involved in the process of M&A integrations. Setting up logical and attainable goals backed with resources and a well-managed team of leaders to undertake the greater objective of achieving successful post-merger integration.?

The dynamism associated with M&A acts as a two-edged sword. On the one hand, it opens immense growth opportunities but also makes it a risky game. It is essential to identify and mitigate the risk before it even starts to hamper productivity. A systematic, adaptive planning approach that takes into consideration the unpredictability of the process can significantly mitigate the risk associated with post-merger integrations.??