Integration Planning: Success of a Takeover or Merger
To what extent is integration planning the most important factor determining the success of a takeover or merger?
Takeovers and mergers are complex transactions where many things can go wrong and therefore affect the success or failure of the deal. Integration planning is an important part of the takeover process, although there are other potentially significant factors that affect whether a takeover is successful which also need to be considered.
Integration planning refers to a process in which the buying business (the acquirer) identifies how it will run the takeover target once the transfer of ownership has been completed. Integration involves many functional challenges such as how to manage customer reaction to the takeover, handle uncertainty amongst employees and integrate potentially different computer systems. Key strategic issues also arise – for example decisions over the future of competing brands, key business locations and the senior management structure. Integration planning normally takes place before the transaction is completed with the aim of ensuring that the acquirer has a clear idea of the integration issues and a realistic action plan of how these issues can be addressed. It can be seen therefore that good integration planning can reduce the risks involved.
One reason why integration planning is important in determining the success of a takeover is that the process of integration is closely tied in with the need to achieve synergies. Synergies include cost savings and additional revenues from the deal and are a key part of the value the shareholders of the acquiring firm aim to obtain from a takeover. A well-planned integration process will identify the most significant synergies and how they can be achieved, which should also encourage management to focus on those synergies wheb they take control. For example, when Santander acquired Abbey National in 2004, Santander recognised that the most important cost synergies (around £350m per
Takeovers and mergers are complex transactions where many things can go wrong and therefore affect the success or failure of the deal. Integration planning is an important part of the takeover process, although there are other potentially significant factors that affect whether a takeover is successful which also need to be considered.
Integration planning refers to a process in which the buying business (the acquirer) identifies how it will run the takeover target once the transfer of ownership has been completed. Integration involves many functional challenges such as how to manage customer reaction to the takeover, handle uncertainty amongst employees and integrate potentially different computer systems. Key strategic issues also arise – for example decisions over the future of competing brands, key business locations and the senior management structure. Integration planning normally takes place before the transaction is completed with the aim of ensuring that the acquirer has a clear idea of the integration issues and a realistic action plan of how these issues can be addressed. It can be seen therefore that good integration planning can reduce the risks involved.
One reason why integration planning is important in determining the success of a takeover is that the process of integration is closely tied in with the need to achieve synergies. Synergies include cost savings and additional revenues from the deal and are a key part of the value the shareholders of the acquiring firm aim to obtain from a takeover. A well-planned integration process will identify the most significant synergies and how they can be achieved, which should also encourage management to focus on those synergies wheb they take control. For example, when Santander acquired Abbey National in 2004, Santander recognised that the most important cost synergies (around £350m per