Transcript Post-merger Integration

Post-merger Integration
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Poor post-merger integration is one of the primary reasons acquisitions fail.
Must have adequate planning, timing, attention to detail as well as
contingency plans.
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Acquisition posture
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Methods for motivation and integration
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Types of integration approaches
Post-merger Integration
 Acquisition Postures
Rescue
Cooperative
Collaboration
Contested
Situation
Raid
Adversarial
Post-merger Integration
 Acquisition Postures
Rescue
Rescue
Collaboration
Contested
Situation
Cooperative
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Raid
Adversarial
Rescue
 Financial salvage operation
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Firm has significant weaknesses
Incumbent top management generally leaves (had their chance).
Loss of leadership
Target firm employees threatened by layoffs, sell-offs etc.
Generally good cooperation (target firm employees are still part
of the vanquished firm).
• Primary issues
- Rebuild corporate self esteem
- Well-defined sense of direction
Post-merger Integration
 Acquisition Postures
Rescue
Rescue
Collaboration
Cooperative
•
Contested
Situation
Raid
Adversarial
Rescue
 White Knight Scenario
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Decisions based on expediency (severe time pressure)
Second guessing (seller), buyers remorse (buyer)
Significant post-merger surprises
Post-rescue must determine how the firms will interact and
conduct compatibility studies of the different cultures,
processes and procedures.
• Chevron rescue of Gulf oil from T. Boone Pickens.
Post-merger Integration
 Acquisition Postures
Rescue
Cooperative
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Collaboration
Collaboration
Contested
Situation
Raid
Adversarial
Collaboration
Acquirer generally does not use heavy-handed tactics.
Diplomacy and goodwill are critical.
Often difficult because of poor follow-up management.
Generally less post-merger drift (sag in productivity, loss of
morale, etc.).
 American Airlines acquisition of TWA.
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Post-merger Integration
 Acquisition Postures
Rescue
Collaboration
Contested
Situation
Raid
Cooperative
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Adversarial
Contested situation
 Conditions
• One party has a strong interest in the deal
• Two parties want very different deals
• Competitive bid situation
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Less of a feeling of a victor and vanquished than in “raid” situations.
Competition can lead to increased ambiguity
Significant post-merger drift.
Example: Walmart, J. Sainsbury PLC, and William Morrison
Supermarkets PLC competitive bids for Britain’s Safeway PLC.
Post-merger Integration
 Acquisition Postures
Rescue
Cooperative
•
Collaboration
Contested
Situation
Raid
Raid
Adversarial
Raid
 Adversarial climate is at its peak (maximum resistance by target
firm).
 Intense emotional battle
 Rumor mill operates in both firms.
• Target firm generates antagonism among its employees
toward the raider (move will hurt employees, morale, and
create an uncertain future).
• Rally around management and become more cohesive in
the struggle against a common enemy.
 IBM’s hostile takeover of Lotus Development Corp.
Post-merger Integration
 Acquisition Postures
Rescue
Cooperative
•
Collaboration
Contested
Situation
Raid
Raid
Adversarial
Raid
 If the takeover is successful it does not end the impact of
residual antipathy.
• Employees of the acquired firm may find it difficult to make the
psychological shift from conflict to brotherhood.
• Battles may continue for years (subtle resistance, guerilla
warfare).
• Incumbent management concerns (recant position of defiance
or resign).
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