New Report Highlights the Key Ingredients for Successfully Integrating Companies

Powering Up for PMI: Making the Right Strategic Choices.

Jun 19, 2007, 01:00 ET from The Boston Consulting Group

    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 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