Mar 31 ‘23 18 min read
PWC has found that 60% of CEOs will accelerate M&A activities in 2023. Additionally, over 90% of M&A and private equity leaders achieved desired outcomes with transformation deals and post-merger integration (PMI) in 2022. Still, successful post-merger integration requires careful planning.
This post describes the importance of integration planning and provides recommendations for smooth integration. Keep reading to discover the PMI place in the M&A timeline and get a comprehensive post-merger integration checklist.
What is post-merger integration?
The deal closure is just the tip of the M&A iceberg. According to Ernst & Young, the post-merger integration process is the biggest challenge among all M&A activities.
Post-merger integration (PMI) is when two companies combine resources, technologies, people, and business functions to maximize the value of the merger.
In successful acquisitions, PMI activities center around a detailed integration checklist plan. A post-acquisition integration checklist is a multi-step guideline that outlines essential PMI activities in the M&A timeline to realize integration goals.
The importance of post-merger integration
Boston Consulting Group emphasizes that companies still spread PMI activities across the day-to-day chores of their departments.
However, putting PMI in the background is the reason why 70-90% of deals fail during a post-merger integration phase.
Fortunately, the PMI perspective has changed in 2023.
PWC’s 2023 M&A integration survey shows that addressing integration aspects helps 45% of organizations achieve significant operational success. It’s a 236% increase compared to 2017-2019 measurements.
PWC also considers a well-defined post-merger integration plan the second most important contributor to successful PMI. It allows companies to conduct wise risk management, realize synergies, and generate higher value.
Key elements of post-merger integration
One should build post-merger integration planning around the main business aspects, including but not limited to:
- Products and services – Integrating and optimizing products and services.
- Marketing – Rebranding, developing marketing strategies for shared audiences, channeling new and existing customers to the unified brand.
- Supplies – Reevaluating assets, consolidating suppliers, and optimizing procurement processes.
- Real estate – Selling redundant facilities or obtaining new holdings, relocating employees, and optimizing production facilities.
- Human resources – Optimizing employee policies, integrating HR systems, optimizing staff, etc.
- IT systems – Optimizing, consolidating, or replacing IT systems, and migrating corporate data.
- Finances – Combining financial and operations systems, identifying and implementing financial synergies.
- Legal – Restructuring a merged entity and managing compliance, including regulatory approvals, contracts, agreements, leadership structure, etc.
M&A integration timeline
According to McKinsey, 50% of successful acquirers achieve key synergy targets within the first year.
PWC’s research on 200+ M&A deals has found that successful dealmakers integrate first business functions three months post-deal and finish PMI within 1.5 years. Finances take the least time, while IT systems require the most effort.
Therefore, you should set PMI timelines within these timeframes and aim to complete PMI in 1.5 years post-deal at maximum. Let us get to the PMI phases in the M&A timeline.
|PMI phase||Position in the M&A timeline|
|Pre-planning||Final due diligence stage|
|PMI due diligence||After primary due diligence, when both parties finalize the deal closing decision|
|Day 1 readiness||The first day after deal closing|
|Day 100||From day 100 post-deal and beyond|
How to achieve successful post-merger integration?
PWC has found that a robust methodology, wise leadership, timely cultural integration, and seamless communication strategy help companies meet PMI deadlines.
Businesses must also build PMI processes around M&A due diligence team findings. As an acquiring company, you should prepare a due diligence request in advance. As a seller, you should consider these questions to ask when your company is being acquired.
|Check a comprehensive due diligence data room checklist to build a robust foundation for post-merger integration.|
Acquisition integration team roles and responsibilities
Successful merger requires establishing dedicated PMI management teams in advance. They include a steering committee, an integration management office (IMO), and various teams supervising particular business processes.
|PMI team||Composition||Roles and responsibilities|
|Steering committee||Chief executive officer (CEO)||Develops a general post-merger integration plan|
|Chief financial officer (CFO)||Supervises the entire merger process|
|Chief operating officer (COO)||Approves PMI strategies and objectives|
|Chief HR officer (CHRO)||Prioritizes integration initiatives|
|M&A and PMI advisors||Conduct post-merger evaluation|
|Board officers||Ensure project stakeholder alignment|
Develops integration checklists
Supervises particular integration activities
Manages integration planning issues
Ensure cross-department collaboration
Develop integration strategies
|Business analysts||Track PMI process improvement|
|Functional integration team leads||Report to the steering committee|
|Functional teams||Technical experts||Execute the post-acquisition integration project|
|Salesmen||Follow post-merger integration checklists|
|Marketers||Engage in day-to-day integration activities|
|Procurement specialists||Bring the entire process into action|
|Others||Report to IMO|
Post-merger integration checklist: How to implement and customize
A post-acquisition integration plan checklist facilitates deals involving two or more companies and helps executives manage the first acquisitions. One can use the checklist as a reference to keep integration teams on track and increase accountability.
An acquiring company should develop the acquisition integration checklist at an early PMI planning stage and elaborate on it as the integration progresses.
Below, you can check the PMI checklist encompassing everything from preparations to PMI closing activities. As every M&A deal comes with unique challenges, you should customize the checklist based on your workflows.
Day 1 preparation
|Integration governance||Establish a steering committee and an IMO|
|Assemble functional PMI teams|
|Establish a post-merger integration framework|
|Define best practices, policies, and priorities in the PMI timeline|
|Develop the integration roadmap, including Day 1, Day 30, Day 60, and Day 100|
|Establish must-have and desirable integration goals|
|Define integration benefits and synergies|
|Allocate and review legal due diligence results (legal structure, litigations, contracts, regulatory requirements)|
|Define Day 1 must-have and desired activities|
|Develop a synergy tracking approach|
|Establish synergy evaluation criteria|
|Cash management||Conduct PMI cost analysis|
|Prepare financial records|
|Consider financial synergies based on due diligence results|
|Allocate capital across responsible departments based on integration objectives|
|HR integration||Conduct employee audits and gather employee lists for both companies|
|Review payroll structures for both companies|
|Consider employee benefits for both companies|
|Identify key talents to meet from the Day 1 phase|
|Review employee contracts|
|Consider employee relations with labor unions|
|Consider employee support and training initiatives|
|Consider corporate culture initiatives|
|IT integration||Audit technology systems for both companies|
|Ensure the IT integration strategy reflects the company’s growth strategy and ensures competitive advantage|
|Identify technology redundancies and consolidation opportunities|
|Enable uninterrupted access to current technology systems|
|Evaluate data security risks and identify weak spots in existing systems and technologies|
|Marketing and communications||Develop communication frameworks and guidelines for employees, customers, key stakeholders, and partners.|
|Consider communication channels for integration management teams (virtual workspaces, virtual data rooms, emails, video conferencing apps, etc.)|
|Consider communication channels for shareholders, board directors, and partners.|
|Prepare welcoming materials for Day 1.|
|Consider press releases for customers, partners, and other external parties.|
|Integration governance||Ensure Preparation Phase activities are complete|
|Ensure Day 1 plan execution|
|Address past and emerging issues|
|Ensure regulatory compliance readiness|
|Finances||Access the financial systems of the acquired company|
|Ensure PMI budgeting is complete|
|Meet key employees to discuss PMI execution|
|Let employees sign required contracts|
|Introduce employee support and training initiatives|
|Access HR systems of the acquired organization|
|Introduce company culture improvement strategies|
|IT systems||Ensure the staff has access to respective IT systems|
|Set up communication systems for employees, customers, external stakeholders, partners, and others|
|Initiate technology consolidation plans|
|Marketing and communications||Conduct planned meetings|
|Distribute planned materials among customers, employees, shareholders, partners, and others|
|Announce the merged entity’s CEO|
|Integration governance||Ensure 30-day goals and activities get completed|
|Review ongoing issues|
|Report 30-day milestones to board directors, shareholders, and investors|
|Assess integration benefits|
|Track and analyze synergies progress|
|Implement on-demand policies and new contracts|
|Ensure regulatory compliance|
|Finances||Ensure consistency in financial statements|
|Initiate integration processes around the financial system|
|Review integration budget spending|
|Analyze growth forecasts for the post-integration period|
|Establish a financial reporting system for the combined entity|
|Human resources||Analyze employee metrics (turnover, job satisfaction, performance)|
|Develop and update onboarding documentation|
|Establish unified HR policies for the new entity|
|Identify and eliminate HR redundancies|
|Inspect how employee support and training initiatives perform|
|IT systems||Audit existing technology projects|
|Consider how integrated solutions will perform|
|Implement necessary IT changes within the integration plan|
|Review security compliance and security performance|
|Marketing and communications||Conduct planned meetings and ensure lower management meetings occur as planned|
|Review marketing campaigns|
|Develop marketing strategies for the combined entity|
|Implement marketing (branding, customer experience) changes based on the integration plan|
|Sales distribution||Ensure customer communications occur as planned|
|Review pricing models|
|Revise and combine customer lists of the target company|
|Revise and combine product lists of the target company|
|Develop sales forecasts for the post-integration period|
|Operations||Review operations and identify synergies and redundancies|
|Assess project management performance for both companies|
|Review inventory systems based on due diligence findings|
|Identify inventory and real estate consolidation opportunities|
|Conduct on-site checks|
|Supply chain integration||Review supplier contracts|
|Analyze supplier consolidation opportunities|
|Update vendor contracts|
|Integration governance||Complete 30-day and 60-day integration milestones|
|Track, analyze, and report synergies|
|Analyze and track integration benefits|
|Ensure regulatory compliance throughout PMI goals and achievements|
|Identify and address conflict of interest|
|Optimize the combined company’s organizational structure|
|Finances||Track and evaluate financial synergies|
|Consolidate financial records|
|Report financial metrics for the integration period|
|Human resources||Address turnover issues|
|Evaluate and correct HR policies based on performance and integration goals|
|Evaluate and update employee support and training programs|
|Manage labor-related issues, such as employee satisfaction or union relations|
|IT systems||Finish IT performance evaluations|
|Identify IT consolidation targets based on business functions|
|Merge IT infrastructure|
|Implement IT security policies across the combined company|
|Marketing and communications||Finish branding changes|
|Update marketing funnels and direct customers to new websites|
|Update customer touchpoints|
|Sales and distribution||Update pricing policies if needed|
|Establish and maintain communication with new clients|
|Determine a long-term customer relationship management system|
Day 100 and beyond
|Integration governance||Complete the post-merger integration plan|
|Analyze achieved synergies and ensure value creation|
|Finish legal optimization|
|Wrap up integration work streams upon PMI completion|
|Remove all redundancies|
|Finances||Fully implement a financial system for the combined company|
|Review financial metrics for the integration period|
|Human resources||Fully implement HR systems and policies for the combined entity|
|Continue employee support and training programs|
|Implement career development initiatives, benefits, and bonuses|
|IT systems||Transfer data and workflows to new systems|
|Finish infrastructure integrations|
|Marketing and communications||Approve and launch branding campaigns|
|Launch marketing strategies for the combined entity|
|Ensure smooth communication between marketing teams and supervise deadlines|
|Sales and distribution||Implement new business development models|
|Finish employee training regarding new products and services|
Virtual data rooms as a post-merger integration tool
Fortune 1,000 companies, mid-sized, and small businesses use virtual data rooms (VDRs) to facilitate post-merger integration. A virtual data room is a cloud workspace with dedicated M&A lifecycle management tools.
It drives M&A deals from preliminary acquisition research and cybersecurity M&A due diligence to post-merger integration and daily file sharing. A virtual data room combines the best PMI practices and ensures continuous improvement across the entire M&A timeline:
- PMI due diligence. A secure central repository and data management tools accelerate integration research. A data room for due diligence helps PMI teams validate research findings and align post-deal integration with growth strategies.
- Standardization. Standardized document formats, version control, audit trails, and M&A workflows unify integration procedures. It drastically speeds up the process as everyone follows the same framework.
- Communication. Centralized messaging, document storage, and Q&A tools enable quick file-sharing and reduce communication silos. Tasks, redactions, annotations, comments, and other collaboration tools improve the accountability and engagement of functional integration teams.
- Cybersecurity. Bank-grade data encryption, role-based access, and document security tools provide top-notch security and compliance. A VDR leaves no room for data breaches, misused documents, or violated agreements.
The virtual data room market enumerates over 100 solutions, and selecting the right one will help a company achieve the best results. To accelerate VDR selection, one can compare key players in the VDR market and use the knowledge and experience of data room reviews.
Companies should start planning post-merger integrations before M&A closing to harness acquisition benefits and survive in the long run.
For this, top executives should establish post-merger integration management bodies, like steering committees and PMI management offices.
They should develop comprehensive integration plans to accelerate PMI and address ongoing issues as early as possible. A post-merger integration finance checklist will be the easiest to implement, while IT integration takes the most time.
To kickstart PMI and achieve integration goals, successful companies use technology solutions, including virtual data rooms.
An M&A integration checklist covers essential tasks and requirements companies should follow to achieve seamless post-merger integration.
Post-deal activities should begin with a comprehensive post-acquisition integration plan checklist. One should develop it before the deal closes to ensure a fast and efficient PMI start.
To create a merger and acquisition integration checklist, one should establish the PMI leadership team and carefully plan the entire integration from start to finish.