In today’s fast-moving business environment, it is more a rule than an exception that, regardless of the size, core or scope of a business, the organization will, at some point, go through one or more integration processes. They can be the result of mergers, demergers, internal restructurings, growth strategies or strategic reviews, outsourcing or other changes.
In the future, this will only increase. There are several trends driving this development: sectors are converging, companies are seeking and implementing new business models, the network economy and ecosystems are gaining ground.
Therefore, the key to post-merger integration will, in the future, be more and more about cultural integration. As businesses and companies undergo change, organizations and people will continuously need to adapt to and embrace new ways of working, new operating models and new ways of interacting.
KPMG recently carried out a survey looking into the success of post-merger integration among companies in Finland (more than 60 companies that had implemented or taken part in large integration processes in 2017 responded). The respondents named highly similar objectives for their integrations:
In the same survey, respondents were asked about the keys to success and what they would focus more on in coming integrations. Again, the responses were highly similar – the top three were i) internal communication, ii) cultural integration, and iii) better integration planning.
Of these success factors – the key actions that determined the outcome of the integration process – cultural integration stands out. Cultural integration refers to the ways in which organizations interact, the ways teams are formed and work, the ways information is spread and acted upon, and the ways decisions are made. Many respondents felt that, even though the integration process went well and the targets were reached, culture could have gained more attention.
Perform a cultural assessment of the involved organizations as early as the pre-deal phase. The following issues are particularly important:
The above list of questions is not exhaustive, and not all can be answered during the pre-deal stage. However, raising these issues right at the start can provide valuable insights and guidelines for the new organization and the targeted operating model.
When the new operating model is designed, it is likely that processes, areas of responsibility, capabilities and resources will be rearranged – at least in those parts and areas of the business where synergies are targeted. These are also the areas where change will be the most visible and where cultural issues will be likely to arise. The questions to address will include:
The “right” or “best” solution will, of course, vary from case to case. But, whatever solution is chosen, it should be based on a thorough understanding of what will be needed to make it work. Even though operating model blueprints can be designed and introduced on the basis of existing models, if there is no cultural fit, the chances are that not all targets will be reached as quickly as desired.
In business contexts, integration primarily refers to post-merger integration – the work needed to ensure that synergies are captured, processes aligned and ways of working agreed. However, integration is more than combining two or more organizations in a post-deal environment. Integration is not a temporary effort – it does not stop after “Day 100”. While integration is usually an intensive, at times even hectic, project undertaking, it is much more than that – integration is a source of renewal and new thinking.
In the survey referred to above, the common aspect mentioned by respondents was that of growth and renewal: to renew, to gain new ground, to expand. It is direction and ambition that are key – integration is seen as a process, a capability, a vehicle for transformation.
The Cambridge Dictionary defines the verb “to integrate” as follows:
All too often, integration focuses on the first – quickly taking over and forging a new organization and way of working. The key to success is to develop and enable a culture in which people want to integrate and develop. Processes, tools and templates will be needed in the future, but without a culture that wants to develop, tools and methodologies will not be enough.
Our study about post-merger integration success of Finnish companies is based on interviews conducted with more than 60 Finnish companies, which include listed and unlisted companies that have net revenues ranging from less than €50 million to several billion and that have made one or more acquisitions between 2012 and 2017. The study was conducted from June to November 2017. Take a closer look at the full study here.
Director, Global Strategy Group
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