June 8, 2015

How to Effect Effective Merger Boards

Research apparently shows that about 33% of target company directors are retained among Fortune 500 mergers. Yet, as much focus as there is on the actual merger transaction and post-merger integration, there are scant resources devoted to how to create and effect the most optimal post-merger integrated board. This is critical, as (as everyone knows) mergers often fail or, at a minimum, are much less successful than anticipated. So ensuring optimally effective oversight by the post-merger board should be a paramount consideration.

The authors of this NACD Directorship article do a fine job of discussing considerations relevant to effecting effective merger boards taking into account several types of common merger scenarios. Specifically, they address (i) board composition factors; (ii) objectives and tasks for one or more integrated board sessions in advance of – and possibly soon after – the first official post-deal board meeting; and (iii) post-deal oversight priorities.

Board composition considerations include identifying directors with skills and experience most relevant to successful post-deal implementation, director preferences, and chemistry – or the potential for conflict – among director candidates.

Objectives of the special session preceding the first official board meeting include:

  • Introducing directors to each other and exploring their respective backgrounds, including any new directors and those from the buyer and the target company’s board.
  • Meeting the new leadership team and ensuring that they meet the directors.
  • “Level set” on the strategy, the goal of the merger, and the key components of value.
  • Transferring knowledge – with a focus on matters most relevant to the deal (which may include discussions with key customers and/or business partners).
  • Establishing the chair’s role.
  • Beginning to function as an effective board, i.e., establishing a board culture and dynamic that will draw from the skills and experience of all directors and reach well-considered decisions for the company.

Post-deal oversight priorities are logically discussed in the context of transition and “value creation” phases.

This article is a welcome addition to any merger planning resource deck that contemplates a post-deal board integration.