July 13, 2017
Post-Merger Integration: The Board’s Role
I once worked on a big deal for a company that had a reputation for excellence in transformational acquisitions. The buyer brought the usual assortment of lawyers, financial people, and senior executives to the initial “all hands” meeting with the seller – but by far the largest group in attendance was the team responsible for post-closing integration.
Watching them in action, I learned pretty quickly exactly why this company’s M&A track record was so good. They began laying out the details for integrating the acquisition long before the parties even shook hands on a deal, and when the deal closed, they hit the ground running.
Post-merger integration is almost always the most challenging – and least sexy – part of doing deals. This Deloitte memo reviews the critical importance of integration & makes the case for increased board oversight. Here’s an excerpt with some thoughts on the role of the board in post-merger integration (PMI):
The board’s role obviously should not be to supplant management or micro-manage a transaction before or after it’s completed. Rather, board members should look to see that management has set a robust PMI strategy with appropriate resourcing and be held accountable for delivering against it, providing the board with regular updates and dashboards on timing and actions on critical issues, challenges, and milestones.
Many boards assume that everything after this phase will naturally fall into place. Often, that is not the case. In many M&A transactions, it is not until the deal is signed—or later—that the two companies have ample exposure to the leadership style and aptitude of the other company and can begin to know who the key employees will be—and where the problems are.
As a result, the board should gain visibility into the integration leadership decisions, including the appointment of a strong integration leader who can make decisions swiftly and who has the clout to execute on key decisions. A leader who understands cultural issues and is able to navigate the associated challenges is critical. Having that leader ready to combine the two entities is a key part of Day 1 preparedness and sets the stage for a successful PMI program.
The Board should also ensure that there is a well defined set of principles to guide management’s approach to the integration process. Directors should oversee the post-merger integration process, regularly evaluate its implementation, and hold management accountable.
– John Jenkins