What if your company spent countless hours and dollars on a merger only for the business to end up worse off than it was before?
Sadly, this is what happens to many businesses when the smoke clears on an expensive and time-consuming merger. The entire point of merging is to make two businesses that much stronger. Far too often, though, it merely results in the loss of key personnel and the failure to realize any true growth.
To have a truly successful merger, you need to achieve solid synergy – or a greater whole after the combining of two or more. What, though, are the proven ways your own business can achieve this after a merger? Keep reading to discover the best post-merger synergy strategies.
1. Coordinate Your Due Diligence and Post-Merger Integration Teams
Part of effective synergizing is finding ways of enhancing collaboration between key teams within your organization. Which teams need to work closely together, though? To begin with, you need your due diligence team and post-merger integration (PMI) team to have a close working relationship.
When done well, it results in an effective hand-off between these two teams. You can even improve this particular integration of teams and processes by placing select members from due diligence onto your PMI team. This strategy often works well because those who have so closely monitored every stage of the merger can best identify not only opportunities to improve synergy by function, but they can also determine the speediest and most cost-effective ways to realize such harmony.
2. Accelerate Integration from the Outset
One of the biggest questions after a unification is what your different project timelines should look like. And while different projects often require a bit of schedule flexibility, it’s important that you focus on accomplishing a few goals as quickly as possible once the dust has cleared.
What should you focus on in the first months? Ideally, you need to focus on reducing office space and the number of overall employees. This helps to bring costs down, but you’ll need to start working on cultural alignment beforehand to minimize how much internal friction this causes. Finally, use this time to review and, as needed, streamline your services, contracts, and supplier agreements in order to reduce costs and improve integration almost immediately.
3. Firmly Establish Your Stretch Targets
Do you know the biggest problem with most mergers? It’s quite simple: the executives overseeing everything fail to establish proper stretch targets, causing the post-merger business to stagnate rather than grow.
In order to create stretch targets, you need to begin with the numbers provided by your due diligence team and then apply your data and analytics to begin triangulation. Through a combination of internal and external data, triangulation allows your company to establish stretch targets that are ambitious but achievable. Just keep in mind this is an ongoing process, and each new one will bring new data that may change either your targets or your approach to meeting those targets.
4. Learn to Measure Revenue and Cost Synergies
Revenue synergy and cost synergy after a merger are different from the normal P&L figures all successful companies track.
Part of what makes achieving the best possible union after merging so difficult is many different kinds of synergies are possible once you begin properly leveraging shared resources. Because of this, you will inevitably have to determine which combinations to pursue. And if you want to achieve some early victories and better overall business performance, it’s important to focus equally on revenue and cost.
Why is this important? Most companies drop the ball here because they are difficult to track, but successfully tracking them can pay off in a big way. To begin with, you need to carefully define revenue synergy; it’s the gap between the original baseline revenue and the additional brought in by merging. Ultimately, this can help you identify the post-merger activities that are bringing in the greatest amount of additional revenue, and your sales personnel can focus on these areas in order to improve your company’s overall bottom line.
Similarly, cost synergy is tracked by measuring increased efficiency in the new entity by eliminating duplicate jobs, incorporating new technology, and adding a better research and development team, for example.
5. Clean Teams: The Key to Better Synergy
A clean team is your secret weapon during an M&A, but far too few companies take advantage of their use. A clean team is an independent group responsible for gathering and analyzing data during merging, and such teams have access to confidential information that other employees and groups do not. Ideally, a clean team should consist of outside legal and financial advisors.
Because a clean team has access to each company’s financial information that is not available to both companies early on, they can help with analysis and support during critical early – and post – merger activities and negotiations.
A clean team can help merging companies identify risks in key areas when the data involved cannot yet be legally shared between the two groups, and these teams can help provide swift synergies in areas such as procurement savings as well as research and development savings.
6. Continue Closely Tracking Performance after Integration
There are many rookie mistakes companies make during a merger, especially when it comes to breakdowns between different communication channels. However, there is one rookie mistake that is quite easy to avoid, and avoiding it significantly improves your chances of better post-merger synergy. What is it? Closely tracking performance after the integration has been completed.
It’s easy to slack on tracking various targets after integration, but the truth is monitoring those targets is more important now than ever before. Doing so can help your business determine whether its initial assumptions were correct and assist in changing course in certain areas if needed. Furthermore, this gives you objective data to prove the success of your merger, and such information is important to shareholders and the C-suite alike.
Make Your Next Merger a Success!
Now you know our best post-merger synergy strategies. But do you know who is ready, right now, to make your next merger a rousing success?
Here at Confie, we’re always ready for successful businesses like yours to become a part of the growing Confie family. Ready to see how we can help both you and your business grow? All you have to do is reach out online or just give us a call at 714-252-2500.