BOSTON, June 19 /PRNewswire-FirstCall/ -- A new report from The Boston
Consulting Group (BCG) claims that one of the main reasons why more than
half of all mergers and acquisitions fail to create shareholder value is
that acquirers tend to treat postmerger integration (PMI) as a mechanical
process that occurs after the deal is done.
"Although a PMI has to be systematically and rigorously controlled at
the implementation stage, it is the strategic and tactical choices that are
made before the deal is legally closed -- and often before the bid has even
been made -- that ultimately determine whether the integration will succeed
or fail," write the authors of the report, Powering Up for PMI: Making the
Right Strategic Choices.
The report, the first in a series on PMI, highlights several
make-or-break decisions and steps that need to be taken in advance. One of
the most critical is establishing the 'strategic pulse' of the integration.
"Different types of M&A require different approaches," says Peter Struven,
one of the authors and a senior partner and managing director of BCG's
Munich Office. "In a consolidation merger, for example, integration has to
be rapid and top-down with an aggressive timeline. If the lion's share of
the cost synergies is not realized within 12 to 24 months, the integration
is unlikely to succeed. Growth mergers require a more gradual, arm's-length
approach, with the target treated much more as an equal."
"As deals get larger and larger -- since 2002, the average size of an
M&A has doubled to nearly $110 million -- the importance of making the
right pre- PMI decisions is even more critical," adds Struven.
Establishing a clean team to assess commercially sensitive information
and draw up a provisional PMI game plan ahead of the deal's completion is
also recommended. Other key issues discussed in the report include
techniques to retain star employees and ways to gauge the emotional
temperature in a merger and communicate more effectively. Using informal
networkers -- stalwarts of the water cooler -- to provide grassroots
feedback through special electronic mailboxes is just one suggestion.
"Our goal in this new series of reports on PMI is not to provide a
technical manual -- there are more than enough of such guides," says
Struven. "Instead, our objective, based on more than 15 years of experience
in this field, is to highlight the main strategic and tactical issues that
need to be considered, including potential pitfalls and the subtle nuances
that can spell the difference between value-creating and value-destroying
Copies of Powering Up for PMI: Making the Right Strategic Choices can
be downloaded from www.bcg.com. BCG's next PMI report will deal with
specific functions, such as R&D, IT, and procurement, as well as particular
SOURCE The Boston Consulting Group