Understanding the landscape of the entities and implementing the right post-acquisition strategy.

This blog aims to deliver the right post-acquisition strategy typology that increases the value realisation potential of the firms post M & A through integration as a medium.

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Mergers and acquisitions have been the common growth strategy utilised by organisations across the globe, to extend an existing organisation or activity with the goal of long-term profitability and increased market power. International mergers and acquisitions are the primary means by which multinational firms engage in foreign direct investment to optimise the Return on Investment for the shareholders.

According to the PWC, the global deal value for January 2023-June 2023 stood at USD1.2 trillion, which is expected to increase. Mergers and acquisitions have become more complex and riskier with the changing landscapes of the businesses. It is worth mentioning that not a single "mega deal" surpassed $10 billion between October 2022 and January 2023.

What is post-merger and acquisition integration?

The process of consolidating the organisational structures, cultures, and functional activities of the two independent organisations into a single entity after merger and acquisition is known as post-merger and acquisition integration. Given that two distinct and independent organisations are coming together, this is not something that can be accomplished quickly. The goal of post-merger integration is to create a unified and efficient organisation. Post-merger integration is the make-or-break stage of the whole merger and acquisition process. This blog aims to deliver some of the best practices and strategies that increase the value realisation potential of the firms in the post M & A Integration phase.

Understanding the landscape of the two entities and implementing the right post-acquisition strategy typology.

There are many post-acquisition strategy typologies that are developed to optimise the realisation of synergies in terms of revenue, cost, and finances of the merging firms. Firms can implement Haspeslagh and Jemison (1991) typology to understand the environment of the two merging entities based on the need for Strategic Interdependence and Organisational Autonomy to maximise the benefits.

There are multiple post-acquisition typologies developed before and after, in different disciplines like cultural (Cartwright and Cooper, 1992, 1995; Nahavandi and Malekzadeh, 1988; Siehl and Smith, 1990), psychological (Mirvis and Marks, 1992, 2003), and human resource perspectives (Napier 1989). ?For instance, the well-known conceptual framework by Nahavandi and Malekzadeh (1988), derived from earlier work by Berry (1983) on how groups adapt to conflict, investigates how organisational cultures may align in the post-integration phase.

However, the Haspeslagh and Jemison (1991) typology is the most used typology for its simplicity and ease of understanding.

The strategic Interdependence defines how the firms should operate in the areas of capability transfer and resource sharing. This transfer and sharing can be done as a single transaction transferring values from the previous firm to the new firm known as value capture. The other approach is value creation which is a long-term process where both the firms are involved in resource sharing and functional skills transfer. Organisational autonomy refers to an organisation's ability to preserve or dissolve its culture.

Absorption: The acquirer company absorbs the acquired business and assimilates into its culture. The acquired company often aligns with the target’s strategies.

Symbiotic: Both companies are highly interdependent but still with a high level of autonomy. Both companies co-exist learning from each other and sharing values.

Preservation:?The acquired company preserves its way of doing business. The objective for acquiring a company is often learning from the acquired company.

Holding: In this stage, value is created only by financial transfers, risk-sharing or general management capability.

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The best practices and strategies to implement in the post-merger integration process are heavily dependent on the merging entities need for autonomy and independence in the business.