The world of manufacturing investment banking tends to focus on everything that comes before the deal: regulatory snafus, final sale price, and the challenges of inertia. But for most companies, success unfolds during the post-merger integration, after the deal is sealed. This success relies on careful planning to ensure the deal realizes its promised value and maximizes time, effort, and talent.
Here are five strategies to ensure that, when the deal closes, you can capitalize on the opportunities and steer clear of potential pitfalls:
Identify and Understand Value Drivers
Start with what creates value for your business. Identify all the ways your business creates value and make a clear plan to succeed on each front. It’s not enough to simply point to potential sources of value. You must have reliable metrics for determining how much these value drivers are worth and how your business intends to drive that value higher. It’s good practice to prepare backup plans and be ready to adapt quickly should market or other factors change.
Know the Importance of Governance Structure
If you’re merging two companies with distinct cultural and operational differences, you’ll need to establish a new governance structure that helps expedite integration and reduces the risk of value dilution. Instead of creating functional teams, try defining cross-functional value-creation groups and focusing on solutions that address multiple functions. Start building your governance structure early in the process. Planning ahead will help ensure a smooth integration of operations and safeguard the value of your business.
Make a Diligence “Clean Room”
During the due diligence phase before closing a deal, having timely access to necessary data is critical. Delays can cause the deal to lose momentum. If you can’t produce the data a buyer needs, they may begin to lose interest. Using a “clean room”, where a neutral third-party vendor or individuals without conflicts of interest share data between the parties, can help you expedite the process. This not only accelerates due diligence but can also help with assessing future synergies and cost savings—a key consideration for integration planning.
Design a Detailed Operating Model for the Value Chain
You must have a deep and complete understanding of both company’s current people, systems, processes, and assets. This is the foundation upon which the team will build the new business, leveraging the respective strengths of each original company. The changes you make to the operating model depend on the type of deal and its goals. A small tuck-in may not require dramatic changes. A transformative deal, by contrast, presents the opportunity to implement sweeping reforms that increase value.
Pay Attention to Company Culture
Culture is an often overlooked element in the deal, and it’s the one that’s most likely to send the deal awry. Shifts in corporate demographics, management style, requirements, benefits, and more can be real challenges for your workforce—which in turn can create serious challenges for the business. The unspoken dynamics—who holds the power, who makes decisions, and how employees are treated—carry immense weight. So, acknowledge these differences openly and find ways to bridge these gaps.
Post-merger success hinges on a seamless integration of two businesses. You’ll need astute planning, foresight, a deep understanding of the two cultures, and the ability to adapt swiftly. Whether you’re in the midst of a merger or contemplating one, NuVescor can help you with integration planning. Contact us to learn more about how we can help you negotiate a successful deal for you and your business.
This blog was originally published in May 2021 and newly updated in November 2023.