Post Merger People Integration
Whitepaper on
Post Merger
People
Integration
CONTENTS
Merger and Acquisition: The story so far
Post Merger People Integration
Addressing Key People and
Organization Risks
1
5
7
Managing Change during Post
Merger Integration 13
Addressing Key Leadership
Challenges 17
© 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
FOREWORD
As the global economy shows preliminary signs of recovery, merger and acquisition (M&A) activity is poised to resurface. Last year, global M&A activity totaled USD 2.4 trillion, up 23 percent from the year before, marking the first positive growth since 20071. Smaller deals dominated 2010, but each of the four largest deals topped USD 20 billion1. There exist multiple triggers for companies to merge or acquire. Most of them can be grouped into reasons such as growth, synergy, diversification, horizontal & vertical integration, defensive measures and pressure to do a deal, any deal.
Anyone who has researched merger success rate knows that more than 70 percent of all mergers and acquisitions fail to produce any benefit for the shareholders, and over half actually destroy value2. Majority of the companies report that their M&A deal failures may be attributed to “people and organization issues” such as lack of shared vision, leadership clash, cultural mismatch, loss of key talent, misaligned structures, lack of management commitment, lack of employee motivation, poor communication and poor change management. Financial advisors may guide merger managers in broad areas in which merger synergies may be realized, but the success of a merger or an acquisition depends more on getting the people equation right. Thus, it is vital for the organizations to be mindful of people issues right from the design stage to the implementation stage.
However, when it comes to due diligence most
Post Merger
People
Integration
CONTENTS
Merger and Acquisition: The story so far
Post Merger People Integration
Addressing Key People and
Organization Risks
1
5
7
Managing Change during Post
Merger Integration 13
Addressing Key Leadership
Challenges 17
© 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
FOREWORD
As the global economy shows preliminary signs of recovery, merger and acquisition (M&A) activity is poised to resurface. Last year, global M&A activity totaled USD 2.4 trillion, up 23 percent from the year before, marking the first positive growth since 20071. Smaller deals dominated 2010, but each of the four largest deals topped USD 20 billion1. There exist multiple triggers for companies to merge or acquire. Most of them can be grouped into reasons such as growth, synergy, diversification, horizontal & vertical integration, defensive measures and pressure to do a deal, any deal.
Anyone who has researched merger success rate knows that more than 70 percent of all mergers and acquisitions fail to produce any benefit for the shareholders, and over half actually destroy value2. Majority of the companies report that their M&A deal failures may be attributed to “people and organization issues” such as lack of shared vision, leadership clash, cultural mismatch, loss of key talent, misaligned structures, lack of management commitment, lack of employee motivation, poor communication and poor change management. Financial advisors may guide merger managers in broad areas in which merger synergies may be realized, but the success of a merger or an acquisition depends more on getting the people equation right. Thus, it is vital for the organizations to be mindful of people issues right from the design stage to the implementation stage.
However, when it comes to due diligence most
Bibliography: • Accenture/Economic Intelligence Unit 2006 Global M&A Survey, 2006 • Esther Cameron & Mike Green (2009), Making Sense of Change Management, Kogan Page, London • Alistair Moffat, Adrian McLean, (2010) “Merger as conversation”, Leadership & Organization Development York: McGraw-Hill • Alzira Salama, Wayne Holland, Gerald Vinten, (2003) • Appelbaum, Steven H., Gandell, Joy, Jobin, Francois, Proper, Shay, and Yortis, Harry (2000), “Anatomy of a merger: Group, 2004 • Han Nguyen, Brian H J. JASINSKI • Ben De Haldevang (2009), “A New Direction in M&A • Betania Tanure and Roberto Gonzalez-Duarte (2007), “Managing people in radical changes (M&As)”, International • Bundy, 2007, The Culture of Combination: Changing Behaviours and Deal Success in Mergers and Acquisitions, – Corporate Executive Board, 2006 • C • Charles Parker (2009) “On becoming a processenabled organization: How to seed a culture of quality in a postacquisition environment”, Global Business and Organizational Excellence, Vol. 29 Iss: 2, pp 26–39 • Chris Rees and Tony Edwards (2009), “Management • Ingmar Bjo¨rkman (2006), “The HR function in large-scale mergers and acquisitions: the case study of Nordea”, THE 360-DEGREE VIEW”, Emphasis, 2006 • Katinka Bijlsma-Frankema, (2001) “On managing cultural • Kevin D. Wilde (2004), “HR systems drive successful Post acquisition integration at General mills”, Journal Of