Fixing Post-Merger Integration Issues

Many mergers fail to deliver the results expected at the outset. In this case, part of the problem was an imbalanced diligence process. All acquirers do extensive due diligence on the target company prior to moving forward with a transaction and this acquirer had accomplished this. But few go so far as to benchmark the acquirer and the target side by side as a starting point for their integration plans. That’s what this acquirer did, with surprising results.

The acquirer, which is owned by a private equity (PE) firm, is a security company with a high reliability wired network. The target has a wireless network. The idea was to move the wireless network under the wired company. But the integration was not going smoothly. Six months into it, the PE firm and the company used IC Rating™ to benchmark the intellectual capital of the two operations. The results showed surprising differences in management, innovative capacity, internal processes and controls at the two companies. The results also showed that the client base of both companies was confused about the merger—doing damage to both brands.

The bottom line—the information gained through this IC Rating led to dramatic shifts in the integration strategy and ultimate results of this merger. There was much greater respect for some of the practices and strengths of the acquired company, which led to knowledge transfer upstream to the acquirer. It also led to more specific plans for brand strategy and cross-selling. It’s a simple lesson but one rarely applied—an acquirer should look at itself as closely as it does its target to develop the most effective integration plan.

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