Post-merger integration - or: the challenge really begins after the signing of the company purchase agreement
No matter which of the numerous studies on the success of mergers & acquisitions one has read, the results are sobering - others would say frightening! As a corporate finance consultant who has advised on a large number of M&A transactions on both the buyer and seller side for more than 20 years, and looking back at the results, we can unfortunately only agree with this. In sum, we can state the following rule of thumb for more than 80% of M&A deals: "The seller wins - the buyer loses". This fact is due to three mistakes made by buyers, which are frequently found in both large and small M&A transactions:
- Buying too expensively! The causes are manifold. Mistakes that buyers make again and again are: insufficient preparation of the buyer for the M&A process; an unprofessional and often unstructured approach; no pro-active approach and thus no alternatives to a target; the pressure from the capital market/shareholders to "have to" announce an M&A transaction by the end of the year at all costs; etc. The reason is that buyers buy at the wrong time
- Buying at the wrong time! If market sentiment is bad and company valuations are at rock bottom, then one waits "to be on the safe side"; if the market is overheated and everyone is desperate to announce an acquisition, then one buys in "quickly"
- Post-merger integration is seen as a necessary evil and is carried out "on the side" or is not prepared and carried out professionally at all
The example of BayernLB and Hypo Alpe Adria is probably one of the examples to which, according to press reports, all of these three errors mentioned apply and one more besides. Link to one of the many articles from the Süddeutsche Zeitung on this topic, which is now also occupying the public prosecutor's office. The BayernLB / Hypo Alpe Adria case is a classic example of how a buyer can be of the opinion: "The bigger the ship [that I am taking over], the lower the probability that it can sink" - a classic misjudgement. Hypo Alpe Adria "went under" or was sold back to Austria for the symbolic price of one euro, destroying several billion in taxpayers' money.
Our advice on post-merger integration is
- An acquisition is only successful if it is carried out professionally and the post-merger integration process has already been planned and initiated BEFORE the signing of the Sales and Purchase Agreement and discussed with the seller! In the language of football: "After the game is before the game"! Under no circumstances should one accept unfavourable contractual constellations
- A successful post-merger integration takes place quickly, is professionally prepared and is professionally implemented and documented in order to record important learning processes for the next integration
- A successful post-merger integration has its focal points in the corporate culture, in internal corporate communication with employees, in external corporate communication with customers and suppliers, in the willingness of an active knowledge transfer in both directions (buyer-seller-buyer!), in the retention of key employees and in a post-merger audit (success control!). In other words: If employees and customers have to read details in the press first or only learn about them through "informal channels", then something is fundamentally wrong and the beginning of an unsuccessful acquisition is preordained.
